The British Retail Consortium (BRC) has reported that shop prices in January increased at the slowest rate in over 18 months. Despite inflation reaching near-record highs last year, price inflation in shops dropped to 2.9% from 4% in December due to discounts and reduced prices for items such as milk and tea. However, prices are still rising, with food prices increasing by over 6% annually on average. The BRC also noted that the rate of price increases for non-food items slowed down to 1.3%, a decrease from 3.1% the previous month, largely due to post-New Year discounts.
However, the BRC warned that many households have not yet felt the benefits of lower inflation and there is a risk that prices could rise again. BRC Chief Executive Helen Dickinson stated that efforts to slow price increases could be hindered by other cost pressures such as the rise in the National Living Wage and an increase in business rates in April. She also expressed concerns about rising geopolitical tensions adding to supply chain costs.
Despite these concerns, there is some optimism that headline inflation could approach the Bank of England’s 2% target as energy bills are expected to decrease in 2024. This anticipated drop in inflation has sparked hopes that the Bank may reduce its key interest rate, which is currently at a 15-year high. The Bank has raised interest rates 14 times since December 2021 to combat inflation, which has put a strain on UK households’ finances over the past two years.
