According to the Office for National Statistics (ONS), annual inflation in the U.K. rose to 3% in January, surpassing the 2.8% reading predicted by economists polled by Reuters.
This jump follows a dip in the consumer price index (CPI) to 2.5% in December and a three-year low of 1.7% in September, driven by rising fuel costs and increased service fees.
In February, the Bank of England (BOE) reduced its benchmark rate to 4.5% following sluggish economic growth and a decline in inflation. This rate cut marks the central bank’s first adjustment of the year, aiming to spur economic activity.
Although further rate cuts are expected, the bank forecasts headline inflation could rise to 3.7% by the third quarter of 2025 due to global energy prices and regulatory changes, with a return to the 2% target projected by 2027.
Additionally, the BOE revised the U.K.’s economic growth forecast down from 1.5% to 0.75% for this year.
