Annual January rate a blow to ministers as cost of living accelerates. UK inflation accelerated at the start of this year, eating into workers’ wages and putting pressure on employers to boost monthly pay packets. The consumer prices index (CPI) measure of inflation rose to 3% in January, the Office for National Statistics reported, up from 2.5% in December. City economists had expected inflation to rise to 2.8% in January.
Bank of England forecasters have predicted that inflation will rise to 3.7% later this year as energy prices and a series of utility bill increases add to business and household costs. A rise in inflation will come as a blow to ministers, who were given a boost a month ago when the CPI dropped from 2.6% in November to 2.5% in December. Earnings growth edged up to 6% including bonuses in December, giving workers a real-terms pay rise of 3.5%. However, pay rises are expected to track down this year while inflation increases, squeezing real disposable incomes.
