Bank faces calls to increase interest rates as inflation holds steady at 3%

came in higher than expected last month, ratcheting up pressure on the Bank of England to hike interest rates as soon as May.

Figures from the Office for National Statistics (ONS) show the Consumer Price Index (CPI) rate of inflation came in at 3% in January, unchanged from December, but lower than the most recent peak of 3.1% in November.

Economists were pencilling in a drop to 2.9%.

Ben Brettell, a senior economist at Hargreaves Lansdown, said that it would have marked the first step towards bringing inflation back to the Bank’s 2% target.

“But in fact the rate remained at 3%, with price rises driven by clothing, footwear and recreational goods/services,” he said.

“Inflation’s now been above target for 12 straight months. This adds further weight to the case for higher interest rates sooner rather than later,” he said.

Mr Brettell said it now looks like the next rise “may well happen in May”.

“Indeed Bank of England policymakers said last week they’ll try and bring inflation back to target more quickly than previously expected, which means

Senior economist: Ben Brettell

rates could rise faster and further than anticipated,” he added.

Higher inflation has been fuelled in part by the Brexit-induced collapse of the pound, which has made imports more expensive and driven up the cost of living, adding pressure on households squeezed by paltry wage growth.

While ONS reported signs of weaker price rises for fuel and food in January, those were offset by a shallower fall in leisure costs.

ONS senior statistician James Tucker said: “Headline inflation was unchanged with petrol prices rising by less than this time last year.

“However, the cost of entry to attractions such as zoos and gardens fell more slowly,” he exINFLATION plained, as ticket prices tend to fall at the start of the year.

At the pumps, petrol prices increased by 1.1p per litre on the month to 121p per litre, while diesel rose 1p to 124.5p per litre.

Food price inflation also appeared to be slowing, having risen strongly since mid-2016, edging down 0.1% on the month amid larger falls in the cost of meat, oils, milk, cheese and eggs.

Sterling increased 0.5% against the dollar to $1.39 following the news. Against the euro, the pound was trading flat at €1.12.

Clothing prices helped to prop up the inflation figure despite having fallen 3.7% month-onmonth, which marked a weaker drop compared to the 4.3% fall during the same period a year earlier.

Airfares, which usually fall after the holidays, also dropped at a slower rate, down 33.2% month-on-month, compared to a 36% drop a year earlier.

Meanwhile, tobacco costs grew faster at 0.4%, which was likely due to the remainder of duty price hikes coming through after being introduced in November.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH), the preferred ONS measure of inflation, held steady at 2.7% in January, unchanged from the month before. More than 40% of Northern Ireland primary schools have signed up to an initiative led by BT for boosting tech literacy. Ruby and Shea (above) from St Mary’s, Aughlisnafin, in Castlewellan have benefited from the Barefoot Computing Project, which helps teachers learn to teach computer science. The programme is led by BT in Northern Ireland and supported by BCS, the Chartered Institute for IT, and CAS — Computing at School