In January, the UK’s inflation rate fell for the third month in a row to 10.1%, a reduction of 0.4% from the previous month. However, this rate is still well above the Bank of England’s benchmark of 2%.
The graph below shows that the trend over the last year has been one of monthly rises until inflation peaked at 11.1% in October 2022. Although the reductions seen in the last quarter suggest that inflation may now follow a downward trajectory.
Both the Bank of England and the Office for Budgetary Responsibility (OBR) forecast that inflation will begin to drop rapidly towards the late summer (July/August) to 8%, and then to 4% by the end of the year. The forecast is based on energy price rises, that were seen in the middle of 2022, no longer being factored into the inflation rate.
If we look at the wholesale gas price range, there has been a continual fall to today’s opening price at 135p/therm when prices peaked at 650p/therm. Nevertheless, today’s price is still some three times higher than the two-year average in 2019, before the Covid-19 pandemic. Many analysts are saying that energy prices are very unlikely to fall to the averages seen pre-pandemic. That means that members need to factor into production costs higher energy prices in addition to the ongoing volatilities in the energy markets.
Despite the fall in the overall inflation rate however, food price inflation remains stubbornly high. January 2023 recorded a rate of 16.7%, down by 0.1% on the previous month, but the trend of 2022 saw consistent increases.