UK January CPI Also Rises Unexpectedly... Annual Rate 3%

Core CPI 3.7%, Core Services Prices Rise 5%

Impact of Oil and Food Prices, and Service Prices

The UK's January consumer prices rose 3% year-on-year, exceeding expectations.

On the 19th (local time), the UK Office for National Statistics (ONS) announced that the Consumer Price Index (CPI) rose 3% year-on-year in January. This exceeded economists' expectations of 2.8%. It's also the highest level since March last year.

Core inflation, excluding volatile energy, food, alcohol, and tobacco prices, rose 3.7% year-on-year in January, marking the highest figure since April 2024. Core services prices increased significantly by 5% year-on-year.

After the inflation data was released, the British pound is trading at $1.2615 per pound against the dollar, showing little change.

While UK consumer prices recorded their lowest level in three years at 1.7% last September, monthly prices have risen since then as fuel costs increased and service fees rose faster than inflation.

The Bank of England lowered its base rate to 4.5% in January as inflation recently slowed. While the Bank of England has signaled further rate cuts, conditions are not easy. This is because headline inflation is projected to rise to 3.7% in the third quarter of this year.

ONS Chief Economist Grant Fitzner said, "Airfares during the Christmas and New Year period had a significant impact due to rising oil prices."

Ruth Gregory, UK Deputy Chief Economist at Capital Economics, said, "While higher energy prices have pushed CPI above 3%, we still forecast it to fall below 2% in 2026." She pointed out that "if inflation continues to rise, the risk is that interest rates might be cut less or later than expected."

Guest Reporter Kim Jung-a kja@hankyung.com