The UK’s inflation rate jumped to 3.0% in January 2024, higher than many analysts had expected and the strongest reading since March 2023.
Three main factors drove the rise. First, the introduction of a 20% VAT on some private school fees pushed tuition-related costs up by about 13%, directly lifting overall inflation. Second, food and non-alcoholic drink prices rose, with notable increases for meat, bread and cereals. Third, air fares fell by less than is typical after the holiday season, which limited the usual downward pressure on prices.
Core inflation, which excludes volatile food and energy items, moved up from 3.2% to 3.7%, signalling broader underlying price pressures beyond temporary shocks.
The rise in inflation is unwelcome news for households, coming after a period of easing price pressures. The Bank of England, which has cut interest rates three times since last summer, has described the trajectory of inflation as “bumpy.” It expects inflation to climb to around 3.7% by mid‑2024, even as the economy remains weak.
For consumers this means higher everyday costs in the near term, driven by tax changes, persistent food price increases and smaller-than-usual declines in travel costs. Policymakers face the challenge of balancing support for a fragile economy while keeping an eye on inflation that has proved more resilient than anticipated.