UK inflation falls for third month in a row.

Official figures show that inflation fell for a third consecutive month in January but remained close to

a 40-year high at 10.1 per cent.It is the latest sign that the pace of price rises across the economy is slowing down, but the figures do not offer much respite to households facing a record squeeze in living standards.

The consumer prices index, the primary measure of inflation, is thought to have peaked at a 41-year high of 11.1 per cent last October before falling to 10.5 per cent by the end of the year. Economists polled by Reuters had predicted that the index would fall to 10.3 per cent in January.

However, the drop was partially offset by price rises in alcohol and tobacco, up by 4.6 per cent and 0.8 per cent month-on-month in January.

Underlying inflation, which excludes volatile movements in energy, food, alcohol and tobacco, fell to 5.8 per cent in January, down from 6.3 per cent in December.

The UK is suffering its worst bout of inflation in a generation because of soaring global energy prices, the war in Ukraine, Covid and Brexit. The Bank of England expects the rate, which is at more than five times its 2 per cent target, to fall to 4 per cent by the end of the year.

«The fall in services inflation, coupled with evidence yesterday that private-sector wage growth is easing, should allay some of the fears in the Bank that persistent inflation has taken hold,» Smith said. «However, with energy and food prices remaining stubbornly high, poorer households continue to face far higher living costs than richer families».

Falling inflation «may not be enough» to stop the Bank from raising interest rates, according to Yael Selfin, a chief economist at KPMG. «Lower energy prices and the downward base effect from last year’s spike in oil and gas prices are expected to see inflation falling sharply this year,» she said.

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