Inflation held steady at 4% in the year to January, as higher gas and electricity charges were offset by falls in the prices of furniture, other household goods and food.
The mark last month was lower than expected by many economists who expected prices to rise by 4.2%.
Gas prices lifted by 6.8% in January compared to a monthly rise of 0.3% last year, while electricity rose by 4%, compared to a rise of 1.2% a year ago, as regulator Ofgem lifted its price cap.
But rises in food and non-alcoholic drinks fell to 7% last month, from 8% in December, the lowest annual rate since April 2022.
The fall of food and soft drinks to 7% means the annual rate has eased for the 10th month in a row, from 19.2% in March 2023, which was the highest annual rate seen for over 45 years.
Many City traders are betting that the central bank will begin cutting rates at the start of the summer.
Hargreaves Lansdown head of personal finance Sarah Coles says: “Steady inflation won’t build any enthusiasm for rate cuts – particularly with the inflation of services actually rising.
“This is another blow for remortgagers, who saw mortgage rates fall at the start of the year, only to find them stalling and then rising slightly in recent weeks.
“We’re suffering as the market reassesses just when the Bank of England is likely to cut, and just how many rate cuts we might get this year.
“It doesn’t mean the Bank is considering raising rates, or that mortgage rates will stop trending downwards. It may just take longer for mortgage rates to fall.”
John Charcol head of marketing Nicholas Mendes points out: “Mortgage fixed rates hinge on swaps, which heavily depend on market outlook and sentiment. Today’s announcement is an improvement on market expectations, given recent days have witnessed an upturn in short-term money.
“The upcoming budget on 6 March will unveil the government’s plans, and given the inflation still remains above the government’s target of 2%, any potential changes will be of interest.
“Overall, bank rate is anticipated to decrease sooner than initially projected last year now being priced in for June, with no further increases on the horizon.
“Two-year and five-year fixed rates have priced upwards in recent weeks and days as a result of the continuing increase in swap movement, but this trend isn’t expected to be a sign of things to come for 2024.”
Propertymark chief executive Nathan Emerson adds: “The Bank of England made an optimistic projection in February that the rate of inflation would be back down to 2%, like it was prior to the pandemic, and while the figure remains at 4%, this will be sure to make it cautious about cutting rates.
“We now need to start seeing inflation fall so that interest rates can drop too, as this will result in more people being able to move home or step onto the housing ladder.”
