Warnings inflation could breach 2% target as prices rise

Rising food prices drove up inflation in January during the toughest coronavirus lockdown measures since the first wave of the pandemic.

The Office for National Statistics (ONS) said the consumer prices index rose to 0.7% in January – from 0.6% a month earlier – as shops including food retailers and household goods stores pushed up their prices with less discounting this year on items such as beds and settees.

Some experts warned inflation will exceed the Bank of England's 2% target by the end of 2021.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose 0.9% in the 12 months to January 2021, up from 0.8% to December 2020.

According to the Office for National Statistics (ONS), food prices rose by 0.6% in January, compared with a fall of 0.1% last time.

Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: "Inflation rose slightly in January, with food prices increasing.

"Household goods also pushed up prices with less discounting this year on items such as bedding and settees.

"However, there were widespread January sales, with particular price cuts for clothing and footwear."

Ed Monk, associate director at Fidelity International, said that the picture overall was "pretty confusing for prices right now".

"It will take a few months and an ending of current restrictions for the full picture to emerge," he said.

In the long-term, he said that prices will also depend on how the labour market fares once the government's furlough scheme has ended.

"Any increase in unemployment rates could suppress wage and price rises," he said.

The UK's coronavirus vaccine rollout is also likely to push up inflation as the economy unlocks and consumers may start spending roughly £125bn in pent-up savings, the Bank of England has previously suggested