Inflation Eases to 10.1 Percent but Fight ‘Far From Over’: Chancellor

People look at Canary Wharf financial district, from Greenwich Park, southeast London, on Feb. 10, 2023. (Daniel Leal/AFP via Getty Images)

The UK’s inflation rate has eased back for the third straight month to 10.1 percent in January, but the government warned that the fight against inflation is “far from over.”

According to the Office for National Statistics (ONS), the Consumer Prices Index (CPI) rose by 10.1 percent in the 12 months to January 2023, down from 10.5 percent in December 2022.

On a monthly basis, CPI fell by 0.6 percent in January 2023, compared with a fall of 0.1 percent in January 2022.

ONS chief economist Grant Fitzner said: “Although still at a high level, inflation eased again in January. This was driven by the price of air and coach travel dropping back after last month’s steep rise. Petrol prices continue to fall and there was a dip in restaurant, cafe and takeaway prices.

“The cost of furniture decreased by more than this time last year, in line with traditional New Year discounting. These were offset by rising prices for alcohol and tobacco, following on from seasonal price cuts in December and a more subdued rise at the same time last year.

He added: “There are further indications that costs facing businesses are rising more slowly, driven by falls in crude oil, electricity and petroleum prices. However, business prices remain high overall, particularly for steel and food products.”

Britain's Chancellor of the Exchequer Jeremy Hunt walks out of Number 11 Downing Street on his way to make a full budget statement in the House of Commons, in London, on Nov. 17, 2022. (Justin Tallis/AFP via Getty Images)

‘Long Way to Go’

Commenting on the latest inflation figure, Chancellor of the Exchequer Jeremy Hunt warned: “While any fall in inflation is welcome, the fight is far from over. High inflation strangles growth and causes pain for families and businesses. That’s why we must stick to the plan halve inflation this year, reduce debt, and grow the economy.”

Talking to Sky News on Wednesday, Defence Secretary Ben Wallace said that the government has a “long way to go” in its attempt to rein in inflation.

He said: “It’s the right direction. It’s positive. I think it shows that the government’s efforts alongside others to try and make sure that we deal with inflation, because inflation really is the number one enemy to [ensuring] the economy is in the right direction.

“But you know, we’ve got a long way to go. We’ll have to keep working on it.”

The main opposition Labour Party criticised the Conservative government’s economic record.

Labour’s shadow chancellor Rachel Reeves said: “With inflation still close to a 40-year high, people will be asking if 13 years of Tory government has left them and their family feeling better off? The answer will be no.”

She repeated Labour’s call for a windfall tax on oil and gas companies to ease the pressure on household energy bills, which are expected to rise sharply in April when the government scales down its energy support scheme.

She said: “Labour would be bringing in a proper windfall tax on oil and gas giants now to stop energy bills going up in April. Our long-term plan to sprint to clean power and insulate 19 million homes will keep bills low for the future too, and get our economy growing.”

‘Stubbornly High’

Business groups have warned that the inflation rate remains “stubbornly high” and prices have settled at a much higher level.

Alpesh Paleja, lead economist of the Confederation of British Industry (CBI), said: “Another fall in inflation over January suggests that the tide is turning on price pressures. But with inflation and pipeline cost pressures set to remain high this year, households and businesses are likely to feel the pain for a while yet. In particular, the continued strength in more domestic measures of inflation will keep alarm bells ringing at the Bank of England.”

David Bharier, head of research at the British Chamber of Commerce (BCC), said: “The stubbornly high rate means that we are now seeing a compounding effect on what was already a spiking inflation rate this time last year. The peak may have started to pass but prices have settled at a much higher level than two years ago.”

He added: “Most small firms remain hammered by rising costs from energy, raw materials, interest rates, taxation, and new trade barriers with Europe.”

Earlier this month, in an attempt to put inflation under control, the Bank of England, the UK’s central bank, raised interest rates for the 10th time in a row, hiking the base rate from 3.5 to 4 percent to help bring down double-digit inflation.

Governor Andrew Bailey said in a press conference after the rates decision that the central bank had “seen the first signs that inflation has turned the corner.”

Bailey said that CPI inflation is expected to fall below the Bank’s 2 percent target rate in the spring of 2024, as long as energy prices fall as expected.

But he said that it is “too soon” to declare victory over inflation, as “inflationary pressures are still there.”

He added: “If there were to be evidence of more persistent pressures, then further tightening of monetary policy would be required.”

PA Media contributed to this report.