LONDON — Inflation in the U.K. held steady at 4% in January as lower food prices helped offset an increase in energy costs, official figures showed Wednesday.
The reading was better than expected as most economists expected inflation to rise modestly to around 4.2%.
The Office for National Statistics said the monthly drop in food prices of 0.4% was the first since September 2021.
Still, inflation remains double the Bank of England’s target rate of 2%.
The Bank of England has managed to get inflation down from a four-decade high of more than 11%, by raising its main interest rate aggressively from near zero to 5.25%. It has held the rate there since August and there are hopes that cuts may soon be on the agenda.
Inflation was first stoked by supply chain issues during the coronavirus pandemic and then Russia’s full-scale invasion of Ukraine, which pushed up food and energy costs.
While the interest rate increases have helped in the battle against inflation, the squeeze on consumer spending, primarily through higher mortgage rates, has weighed on the British economy, which is barely growing.
Whatever happens on the interest rate front in the coming months, it’s likely that relatively high borrowing rates and low economic growth will be the backdrop for the general election which has to take place within a year. That’s a concern for the governing Conservative Party, which opinion polls say is way behind the main opposition Labour Party ahead of the vote.