Inflation eases slightly but still in double digits
On a monthly basis, CPI fell by 0.6% in January 2023, compared with a fall of 0.1% in January 2022.
The CPI including owner occupiers’ housing costs (CPIH) rose by 8.8% in the 12 months to January 2023, down from 9.2% in December 2022.
The largest upward contributions to the annual CPIH inflation rate came from housing and household services (mainly from electricity, gas, and other fuels), and food and non-alcoholic beverages.
The largest downward contribution to the change in both the CPIH and CPI annual inflation rates between December 2022 and January 2023 came from transport (particularly passenger transport and motor fuels), and restaurants and hotels.
Prices won’t fall just rise more slowly
Richard Ollive, senior financial adviser at Wesleyan, said: “It may feel like we’ve turned a corner, but it’s critical to remember that prices aren’t going to start falling – they are going to keep rising, just not as quickly. Pressure on budgets will still be painfully tight, especially if people’s pay packets haven’t grown as quickly as their bills. And there is still every chance of another interest rate rise in the near future, which could heap more pressure on finances.
“We see our customers facing the challenge of funding this higher cost of living while also doing what they can to keep their long-term financial plans on track. Banks are dragging their heels in passing on interest rate rises, so we recommend that anyone who is able to put some money aside should make it work as hard as possible and keeping pace with inflation. Starting, or growing, investments will be important here – giving money the strongest possible chance of achieving real-term growth.”
Sarah Pennells, consumer finance specialist at Royal London, said: “The good news is that the main consumer inflation index has fallen slightly again, following 10 increases in the Bank of England base rate – but that only tells part of the story.
“Price rises continue to outpace wage increases, meaning households are seeing the purchasing power of their money decline even further, putting further pressure on their budgets already stretched after Christmas spending and winter bills.
“Our research shows that one in five people started the year in debt as a result of festive celebrations. Against this backdrop of rising prices and spiralling mortgage payments, households may look for further cutbacks in an effort to stick to their budgets.”