1 of 3 | Britain's inflation rate fell slightly to 10.1% in January, the government's statistical agency announced Wednesday. File Photo by Hugo Philpott/UPI | License Photo
Feb. 15 (UPI) -- Britain's annual inflation rate continued on its downward track last month, the third successive month that the pace at which prices are increasing has slowed, but remains at a near 40-year high, according to government figures released Wednesday.
The almost half a percentage point drop to 10.1%, down from 10.5% in December, was bigger than expected and the third month in a row the Consumer Price Inflation rate has fallen from its 11.1% peak in October, according to the Office for National Statistics' January report.
But food price inflation remains stubbornly high, falling just 0.1% to 16.7%, its highest level in 45 years, while overall CPI places the country near the top of the inflation league table of advanced economies.
Inflation in the European Union is running at 9.2%, while U.S. inflation stands at 6.4%.
The 0.4% decrease in Britain was driven by a slowing in the pace of price hikes in transportation, energy and restaurants and hotels, with air and public transport and petrol and diesel making the largest contributions.
However, that was partially offset by rising alcohol and tobacco prices.
The ONS' chief economist Grant Fitzner said that although inflation remained high, there were further indications that costs facing businesses are rising more slowly, driven by falls in crude oil, electricity and petrol prices.
"However, business prices remain high overall, particularly for steel and food products," Fitzner said.
Chancellor of the Exchequer Jeremy Hunt said that while any fall in inflation was welcome, the fight was far from over.
"High inflation strangles growth and causes pain for families and businesses -- that is why we must stick to the plan to halve inflation this year, reduce debt and grow the economy," Hunt said, referring to an economic blueprint he shared in January.
But Labor's shadow chancellor Rachel Reeves said Britons would take little comfort from the latest figures.
"With inflation figures this morning still close to a 40-year high families across Britain are feeling worse off," Reeves said. "Labor's plan for a proper windfall tax on oil and gas giants will stop energy bills going up in April. Our long-term plan will keep bills low in the future, too."
Government subsidies capping the unit prices of gas and electricity to domestic and commercial billpayers for six months are due to end in April.
The inflation report comes one day after figures showing average wages of British workers jumped 6.7% in the fourth quarter, driven by a tight labor market and workers demanding higher pay to keep up with rising prices.
However, wage increases failed to keep pace with inflation running at more than 10%, meaning workers suffered a real terms pay cut of around 2.5%, leaving them worse off than they were a year ago.
Double-digit inflation and surging wages make the balancing act the Bank of England has to achieve that much more difficult when its Monetary Policy Committee meets next month to decide whether to hold or cut interest rates from their current 4% level -- or risk triggering recession by hiking.
The central bank's primary mandate is to maintain inflation at a target level of 2%.