In This Article:
Rachel Reeves has been forced to correct her statement on inflation after mistakenly implying that workers’ wages had risen at a record pace since Labour came to power.
The Treasury at lunchtime issued a “correction” to the Chancellor’s earlier statement following what it termed an “error”.
Initially, a statement attributed to Ms Reeves and sent to the press said: “Getting more money in people’s pockets is my number one mission. Since the election we’ve seen year on year wages after inflation growing at their fastest rate – worth an extra £1,000 a year on average – but I know that millions of families are still struggling to make ends meet.”
The corrected statement added the critical caveat that wages after inflation are growing not at the fastest rate, but “at their fastest rate in three years”.
The mistake comes as Ms Reeves faces pressure over her stewardship of the economy after inflation rose at a faster than expected 3pc in January.
It is also an embarrassing time for the Chancellor, who is already under fire amid claims she exaggerated parts of her CV.
Ms Reeves has been accused of exaggerating the amount of time she spent working for the Bank of England, and incorrectly claiming to have worked as an economist at Bank of Scotland.
The Chancellor has subsequently updated her CV on the LinkedIn website to state that she worked in “retail banking” at Halifax, which had merged with Bank of Scotland, between 2006 and 2009.
Meanwhile Jonathan Reynolds, the Business Secretary, has been accused of claiming to be a solicitor, despite never qualifying.
Both sets of accusations have raised questions about the integrity of Sir Keir Starmer’s Government. Asked about his Chancellor’s CV last week, the Prime Minister said: “Rachel Reeves has dealt with any issues that arise.”
Sir Keir’s official spokesman confirmed the Prime Minister has no concerns regarding her conduct, and said: “The Prime Minister is working hand in hand with the Chancellor and has full faith in the Chancellor for the job that she has done in beginning to turn the economy round after 14 years of stagnation.”
Ms Reeves’s corrected statement reflects the fact that average weekly earnings, adjusted for consumer price inflation, have grown by 3.4pc in the past year. Pay rises have remained strong as inflation has fallen from 4pc in December 2023 to 2.5pc a year later.
However, that is short of the real-terms pay rises seen in 2021. In the wake of pandemic lockdowns and the distortions imposed by the furlough scheme, annual pay growth, after inflation, peaked at 6.9pc in June 2021 - more than double the strongest month of Labour’s tenure so far.
The Chancellor was responding to news that inflation jumped to a 10-month high of 3pc in January, partly fuelled by the scrapping of the exemption of VAT on private school fees at the start of the year.
Read the latest updates below.
05:00 PM GMT
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04:32 PM GMT
Furniture chain to axe jobs after Reeves’s Budget tax hike
Scotland’s largest furniture retailer is making redundancies after the Budget increased taxes.
Sterling Furniture group, which employs around 400 staff, says it made the decision in response to the upcoming increase to employer National Insurance contributions.
It is currently unclear how many jobs are at risk, but the company said it is acting to “safeguard” its future.
The company was founded in 1974 by George Knowles and currently has seven stores, in Tillicoultry, Glasgow, Aberdeen, Edinburgh, Dunfermline, Uddingston and Dundee.
A spokesman said: “In response to challenges in the evolving retail landscape, including the additional tax burden announced in the recent Budget, we have been forced to take difficult decisions to safeguard the future of the company.
“Regrettably, after conducting a comprehensive review of our operations and staffing levels, we have determined that restructuring and redundancies are necessary to ensure our long-term viability and success.
“The wellbeing of the affected staff is our main priority, and we fully acknowledge the impact these redundancies will have.
“We will do everything possible to minimise job losses and, where feasible, support employees in exploring alternative roles within the organisation. We are committed to helping them through this process to ensure a smooth transition.”
04:25 PM GMT
UK house prices rise by most in nearly two years
British house prices rose at their fastest pace in almost two years in the 12 months to December, according to official data published on Wednesday that added to signs of a recovery in the housing market.
Average house prices rose by an annual 4.6pc to £268,000 in December 2024, the fastest increase since January 2023 and up from a 3.9pc increase in the 12 months to November, the Office for National Statistics said on Wednesday.
Other measures of the housing market have shown a revival in demand, helped by a reduction in borrowing costs that is expected to continue in 2025 and a rush to complete purchases before stamp duty rise for many buyers in April.
However, the ONS said prices in London showed no growth and lagged behind other regions, which were led by north-east England which showed a 6.7pc increase in house prices.
03:51 PM GMT
Gilts rise as market responds to inflation rise
The effective interest rate on UK Government debt rose today after inflation jumped to a 10-month high.
The yield on 10-year gilts jumped to 4.606pc from 4.559pc yesterday.
It came as traders cut their bets on Bank of England interest rates this year. This afternoon, the market is fully pricing in two cuts by the end of December, but with confidence than yesterday.
03:39 PM GMT
Rising prices pushes Lurpak-maker Arla to cut costs
Dairy giant Arla is to cut costs this year as it warned about higher prices.
The company, which makes Lurpak and Cravendale, said it expects to secure up to £91.1m of cost savings this year.
It came as the co-operative, which runs farms across the UK, said it faces challenges including “consumer uncertainty”.
It said lower inflation and higher wages helped to improve customer spending in 2024.
However, prices in the sector have lifted more recently, with fresh data from the ONS showing that average butter prices were up 18.3pc year-on-year in the UK in January.
Arla said its volumes are therefore expected to slip by between 1pc and 2pc this year as shoppers react to price increases. However, it said that revenues would grow amid the boost from pricing.
03:32 PM GMT
Bank of America ‘cautious’ on UK rate cuts after jump in inflation
One of Wall Street’s biggest banks has admitted its forecast for interest rate cuts by the Bank of England could be too optimistic after stronger-than-expected inflation.
Bank of America said it expects policymakers to announce three more quarterly cuts in Britain later thsi year, with the next cut in May.
However, UK economist Sonali Punhani said analysts “remain cautious” over the risk that rising employment costs will push inflation higher.
She said: “This print supports a cautious cutting cycle and implies risks are for less cuts than more.”
However, she added the recent drop in energy prices “if sustained, could put some downward pressure on inflation later in the year”.
With that, I will sign off for the day and hand you over to Alex Singleton for the rest of the day.
03:09 PM GMT
Senior Tory calls for investigation into minister’s CV
A senior Conservative has written to the independent adviser on ministerial standards urging him to investigate claims made by the Business Secretary about his career.
Shadow business secretary Andrew Griffiths took aim at claims by Jonathan Reynolds that he was formerly a solicitor. He in fact never qualified.
Mr Griffiths said such statements “bring public life into disrepute”, adding such “misrepresentation would not be tolerated elsewhere”.
It comes amid claims that the Chancellor also previously exaggerated her CV.
The Treasury was forced to issue a correction today to her statement on the latest official inflation figures.
02:42 PM GMT
US stocks slump at the opening bell
The FTSE 100 deepened its losses after official figures showed inflation surged to a 10-month high in January.
The blue-chip index was last down 0.7pc on the day to 8,707.30 while the midcap FTSE 250 dropped 0.8pc to 20,709.33.
Over on Wall Street, the main stock indexes opened marginally lower after Donald Trump’s latest tariff threats.
The Dow Jones Industrial Average fell 78.2 points, or 0.2pc, at the open to 44,478.12.
The S&P 500 fell 11.8 points, or 0.2pc to 6,117.76​, while the Nasdaq Composite dropped 46.8 points, or 0.2pc, to 19,994.502.
02:18 PM GMT
ECB may soon stop cutting interest rates, says policymaker
The European Central Bank is approaching the point where it might pause or even stop interest rate cuts, a senior official said, briefly triggering upheaval in money markets.
The ECB has cut rates five times since June as policymakers worried about slow eurozone economic growth but with a trade war on the horizon concerns about inflation have returned.
“We are getting closer to the point where we may have to pause or halt our rate cuts,” ECB board member Isabel Schnabel told the Financial Times.
“We need to start that discussion,” she said, adding that “we can no longer say with confidence that our monetary policy is still restrictive”.
Ms Schnabel’s comments led to a swift recalibration of bets on money markets about how swiftly the ECB and Bank of England could cut interest rates.
Traders briefly priced in less than two further UK rate cuts this year but are now pricing in a second reduction by November.
The ECB’s main policy rate now stands at 2.75pc, down from 4pc in September 2023. Traders expect at least two more cuts this year, with a 88pc chance of a third.
02:01 PM GMT
Reeves forced to correct statement after inflation figures
The Treasury has been forced to send out a correction to a statement on behalf of Rachel Reeves sent out after the latest inflation figures.
The Chancellor was quoted as saying that since the election “we’ve seen year on year wages after inflation growing at their fastest rate”, which she said was worth an extra £1,000 a year on average.
However, the Treasury backtracked this afternoon, issuing a correction to journalists stating that real wages were in fact growing “at their fastest rate in three years”.
The blunder comes as the Chancellor faces questions about the accuracy of her past claims about her career.
She amended her CV online after it was alleged she exaggerated her roles at HBOS and the Bank of England and has been accused of claiming to have published work in a prestigious academic journal, which in fact turned out to have appeared in a less well-known title.
01:48 PM GMT
Reeves urged to improve tax incentives for UK investors
Bosses from global financial giants pressed Rachel Reeves to improve tax incentives for UK consumers to invest as the Chancellor battles to boost Britain’s economic growth.
The Government has come under intensifying pressure to boost the nation’s sluggish growth and to pursue reforms to revitalise its finance industry and better compete with rival centres to London like New York.
Executives from JP Morgan, BlackRock, Goldman Sachs, Morgan Stanley, Citi, Fidelity, Schroders and Abrdn all attended a meeting today.
One focus of the talks was requests from the investment industry to change the tax treatment of cash savings accounts (ISAs) to encourage people to invest in stocks and bonds instead, according to Reuters.
Ms Reeves was also pressed to cut stamp duty levied on stock investments, a long-standing demand from finance executives.
01:17 PM GMT
Pound down amid Ukraine peace talks and Trump tariffs
The pound remains down despite the surge in inflation leading traders to reduce bets on interest rate cuts by the Bank of England later this year.
Sterling was last down 0.3pc to below $1.26 as the US dollar strengthened against a range of currencies.
The dollar was boosted by talks over a Ukraine ceasefire and the latest round of tariffs announced by the US.
The Trump administration said on Tuesday it had agreed to hold more talks with Russia on ending the war in Ukraine after an initial meeting that excluded Kyiv.
Meanwhile, the US president said on Tuesday he intends to impose car tariffs “in the neighbourhood of 25pc” and similar duties on semiconductors and pharmaceutical imports.
Tariffs are considered inflationary by many economists, which could prompt the US Federal Reserve to keep American interest rates higher.
12:48 PM GMT
Britain at risk of 4pc inflation, economists warn
Inflation hitting 4pc this year is no longer “unlikely”, economists have warned after the sharper than expected jump in CPI in January:
12:25 PM GMT
‘This inflation rise is just the start’
Rachel Reeves is “clueless and doesn’t acknowledge any blame”, Telegraph readers have said after inflation rose faster than expected to 3pc last month.
Here is a selection of views from the comments section below and you can join the debate here:
11:58 AM GMT
Reeves knows ‘there’s more to do to kickstart growth’
The Chancellor said she had taken measures to help families struggling with the cost of living as inflation rose faster than expected in January.
She said she has “protected working people’s payslips from tax rises, increased the national minimum wage and frozen fuel duty”.
Yet she acknowledged there is “more to do” as she tries to secure growth to boost the economy:
11:47 AM GMT
Traders scale back bets on interest rate cuts after inflation shock
Traders have reduced their bets on interest rate cuts later this year after inflation rose faster than economists had expected last month.
Money markets briefly indicated there would be fewer than two more reductions in borrowing costs before the end of the year.
It comes after inflation jumped from 2.5pc in December to 3pc in January, partly as a result of the Government’s decision to axe the VAT exemption on private school fees.
The jump was higher than the rise to 2.8pc that had been forecast by analysts.
Some economists have warned inflation could rise towards 4pc later this year, with the Bank of England predicting it will peak at 3.7pc.
NIESR associate economist Monica George Michail expects only one more rate cut in the second half of this year “given inflationary pressures from the government stimulus, persistently strong wage growth, and heightened global uncertainties”.
Goldman Sachs expects interest rates to remain on hold at the Bank of England’s next meeting in March but forecast that the Monetary Policy Committee which sets interest rates would vote for a hold by five votes to four.
Economist Sven Jari Stehn said rates would be reduced “at a quarterly pace thereafter”.
The rise in inflation comes after the Government ended the long-standing VAT exemption for private schools on January 1.
From the start of this year, many schools passed price increases onto parents after the standard rate of 20pc was applied to private school education and boarding fees.
The ONS said private school fees surged by 12.7pc compared to the previous month.
The education sector as a whole saw annual inflation at 7.5pc as a result - the highest rate since September 2015.
11:23 AM GMT
How private school fees have increased
Inflation jumped higher than expected in January after the Government scrapped the VAT exemption for private school fees.
Not all private schools have passed on the rise in costs to parents. Use our interactive tool below to see if the private schools in your areas are offering value for money:
11:08 AM GMT
Britain at risk of new era of stagflation, warns Davey
The rise in inflation means Britain is at risk of “stagflation” where prices rise as economic growth stalls, the leader of the Liberal Democrats has warned.
Sir Ed Davey said misguided policies from Chancellor Rachel Reeves put the economy at risk of a “new era of stagflation”:
Nick Lawson of Julius Baer International said data “continues to point to sluggish growth and worsening corporate sentiment in the UK”.
He warned that if today’s data proves the re-establishment of an upward trend in inflation “stagflation may rear its ugly head once more”.
Julian Jessop, economist at Institute of Economic Affairs think tank said he expected Britain would move towards “stagflation-lite”, given the downturn and rising inflation “could still be mild by past standards”.
He said: “Nonetheless, higher inflation will undermine two of the foundations of any recovery in consumer confidence and spending - rising real wages and hopes of further interest rate cuts.
“The renewed increase in food price inflation will be particularly worrying for households on lower incomes.
“Moreover, the Bank of England is now more likely to leave rates on hold again until May.
“In summary, not yet panic stations, but definitely some more bad news.”
10:44 AM GMT
FTSE 100 falls after inflation blow
UK shares fell after inflation jumped faster than expected to 3pc in January.
The FTSE 100 was down 0.2pc while the midcap FTSE 250 dropped 0.5pc as the consumer prices index hit its highest level since March last year.
Glencore was the worse performer on the blue-chip index, falling by 6.5pc after the commodity giant indicated it was considering whether to move its primary listing away from London.
HSBC limited losses on the FTSE 100, rising by 0.6pc as it outlined plans to cut costs by $1.5bn (£1.2bn) by the end of next year.
BP rose 0.8pc amid reports that the oil giant is considering a potential sale of its lubricants business, Castrol, which could be worth about $10bn.
Antofagasta gained 1.3pc after JP Morgan upgraded the rating on the miner to “overweight” from “underweight”.
10:27 AM GMT
Inflation ‘in a different world’ now, says minister
A Treasury minister has said the latest CPI figures underline that “we are in a different world” to previously higher inflation numbers.
Inflation rose to 3pc from 2.5pc but remains well below the peak of 11.1pc reached in October 2022.
James Murray, Exchequer Secretary to the Treasury, told broadcasters: “Today’s figures underline the fact that we are in a different world than we were a few years ago under the previous government, where inflation was routinely double digits.
“But let’s be clear, we know that families across the country are still finding it hard to make ends meet, which is why yesterday’s data about real wages increasing at their fastest rate for three years was so welcome, and why putting more money in people’s pockets is at the heart of our plan for change to kick-start economic growth.”
10:08 AM GMT
Bank of England to cut rates at quarterly pace, says Goldman Sachs
One of Wall Street’s biggest banks expects interest rates to remain on hold at the Bank of England’s next meeting in March.
Goldman Sachs said it forecasts the Bank Rate will remain at 4.5pc but with policymakers to be split over the decision.
It predicts the Monetary Policy Committee which sets interest rates to vote for a hold by five votes to four.
Economist Sven Jari Stehn said rates would be reduced “at a quarterly pace thereafter” given the decline in closely watched services inflation.
He said: “Services inflation rose notably to 5.01pc in January (from 4.37pc), but this was nonetheless six basis points below our expectations, 15 basis points below the Bank of England’s forecast, and a tenth below consensus.”
09:52 AM GMT
Taxes are reigniting Britain’s inflation nightmare
Inflation at 3pc means Andrew Bailey is edging closer to having to write a letter to Ms Reeves explaining why price rises are well above the Bank of England’s 2pc target.
It would make for uncomfortable reading for a Chancellor whose policies have played a part, whether that be imposing VAT on private school fees, increasing the minimum wage or introducing a £25bn increase in employer National Insurance contributions (NICs).
Mr Bailey has said he expected the rise in inflation to be a “bump in the road”, while others have said that a weaker economy would mean companies would not be able to pass on big price rises, limiting an expected second spike in inflation.
However, the Bank still does not expect inflation to return to its 2pc target until 2027, which is likely to keep interest rates higher for longer.
09:32 AM GMT
Inflation jump ‘should be no cause for alarm’
The Bank of England in February slashed its forecast for UK economic growth and warned that inflation would rise more than expected this year, blaming global risks amid US tariff threats.
However, economists have said that today’s figures show signs of hope for policymakers.
Closely-watched services inflation, while up from 4.4pc to 5pc, was lower than analyst forecasts for 5.1pc.
ING economist James Smith said: “What really matters is service sector inflation, and here the news is getting better.
“Admittedly services CPI did rebound up to 5pc, though that was lower than expected and followed an artificially low reading in December.”
Dr George Dibb of the IPPR think tank said the rise in inflation “should be no cause for alarm”.
He said: “Temporary fluctuations are normal, and the Bank of England has been clear that the bigger picture is one of stability with inflation falling again at the end of year. Weak economic growth remains a bigger issue for the UK economy.”
09:15 AM GMT
Pound wavers as inflation higher than expected
The pound briefly rose data showed inflation rose faster than expected in January, weakening the case for the Bank of England to deliver another two rate cuts this year.
The Office for National Statistics said the consumer price index rose at an annual rate of 3pc in January, above forecasts for a rise of 2.8pc.
Sterling spiked after the numbers, but quickly fell back to where it was before the data. It was last down 0.1pc to $1.262.
Against the euro, the pound held steady at 82.7p.
08:50 AM GMT
Inflation shock to ‘reinforce careful and gradual’ pace of interest rate cuts
The Bank of England will keep cutting rates at a “careful and gradual” pace after the latest jump in inflation, economists have said.
Thomas Pugh of RSM UK said the unexpectedly large rise from 2.5pc to 3pc in January “is another step on an upward path that will take inflation to 3.5pc or even higher by the middle of this year”.
He said the rebound in inflation will not rule out further rate cuts as the “economy is too weak for that”, but it will keep policymakers firmly on the “careful and gradual” rate cutting path.
He said: “We still expect one cut a quarter this year, but evidence that the labour market is holding up and inflation is rising faster than expected means the risks of just two cuts are growing.”
Adam Deasy at PwC said: “Although the rise in prices won’t make for pleasant reading, the Bank of England saw this coming to some extent.
“The February MPC report set out their expectation of services inflation coming in just above 5pc for January and the prospect of further rises will reinforce their stance on loosening monetary policy ‘gradually and carefully’.
“It all comes down to timing, and a March cut is likely a touch too soon — today’s inflation print is a speed bump in the road to lower rates.”
But Dr Roger Barker, director of policy at the Institute of Directors, warned: “The latest figures also cast doubt on the pace of future interest rate cuts, which the Bank of England may choose to delay due to the persistence of inflationary pressures.
“The worst-case scenario for UK business is stagflation, combining high inflation and low growth. January’s inflation figures have done little to mitigate the risk of this outcome.”
08:29 AM GMT
Stride: Rising inflation shows Reeves is ‘out of her depth’
Shadow chancellor Mel Stride said Rachel Reeves was “out of her depth, and we’re all paying the price”.
Mr Stride said: “Today’s figures mean further pain for family finances - and it’s thanks to the Labour Chancellor’s record tax hikes and inflation-busting pay rises.
“Labour were warned that their tax spending and borrowing spree would drive up inflation. It means higher prices in the shops and interest rates staying higher for longer, causing mortgage misery for millions.
“This Chancellor is out of her depth, and we’re all paying the price.”
08:13 AM GMT
Rising inflation just ‘a bump in the road’, insists minister
Figures showing inflation jumped to 3pc last month are “a bump in the road”, a Government minister has said.
Policing minister Dame Diana Johnson told Sky News: “That figure going up clearly shows there is a bump in the road...
“I’m going to say to you that we’ve only been in power seven months...
“We’ve had 14 years of economic stagnation, so I think there’s obviously work that’s under way with the Chancellor, but I know that the IMF and the OECD are saying that we’re going to have the fastest-growing economy in Europe, so a bump in the road, and I think the Bank of England have recognised that yesterday.”
However, some economists are sounding the alarm about the jump in inflation, which was higher than expected rise to 2.8pc:
08:07 AM GMT
Senior Tory urges Reeves to reverse Budget tax hikes
The shadow housing secretary told Rachel Reeves she still has time to reverse her Budget tax hikes.
Kevin Hollinrake said some of the tax changes are not due to take effect until April and ditching the increases could help voters to forgive Labour for the state of the economy.
His comments came after a bump in the rate of inflation.
It was suggested to the senior Tory that if the Government reversed the changes and admitted it was wrong then voters could offer some forgiveness.
He told GB News: “Yes, that is exactly right. I think the number one thing that Rachel Reeves could do is reverse her announcements at the Autumn Budget, particularly those massive tax increases.
“They don’t come into effect until April so some of the impacts on the economy have not come to pass yet so they could have an even worse effect on the economy.
“She could decide to reverse those things in terms of those big tax increases.”
08:04 AM GMT
UK stocks edge lower after inflation shock
UK-focused stocks began the day lower after inflation rose by more than expected in January.
The FTSE 100 was little changed at 8,768.18 but the domestically-focused FTSE 250 fell by 0.5pc to 20,841.53.
08:01 AM GMT
Inflation takes off after smaller decline in air fares
Inflation was pushed up by an unusually small decline in air fares last month.
Air fares tend to rise into December and fall into January but this year the pattern was less pronounced than usual, which statisticians think may be because the return date for many long-haul flights fell on New Year’s Eve.
Air fares fell by 19pc on the month in January 2025, compared to a drop of 38.9pc over the same period a year ago.
Ruth Gregory, deputy chief UK economist at Capital Economics, said it was an example of why the latest increase in inflation to 3pc “shouldn’t have too much of an effect” on the Bank of England’s plans for interest rates.
She said: “We doubt this will prevent the Bank of England from cutting interest rates further. But it will mean it continues to cut rates only slowly.”
07:43 AM GMT
Bank of England unlikely to cut rates in March
Traders are betting there is little chance that the Bank of England will cut interest rates next month.
Money markets indicate there is a less than 10pc chance of a reduction in borrowing costs in March, down from nearly 13pc before figures showed inflation hit 3pc in January.
07:39 AM GMT
Inflation to rise close to 4pc this summer, say economists
Inflation is on its way towards 4pc, economists have warned, after the sharp jump in CPI from 2.5pc to 3pc in January.
Suren Thiru, economics director at ICAEW, said:
These figures confirm a disheartening rebound in inflation as rising air fares and the introduction of VAT on private school fees contributed to notably widen the gap with the Bank of England’s 2pc target.
07:34 AM GMT
Minister insists rising inflation down to ‘number of factors’
The Government has “a long way to go in turning round the economy,” the policing minister said after official figures showed inflation rose to 3pc last month.
Dame Diana Johnson insisted were a “number of factors involved” in inflation rising, including increased global energy prices.
She told Times Radio: “We’ve had 14 years economic stagnation, and in seven months we’re not going to turn around the economy that quickly.
“I think it’s quite clear there are a number of factors involved in why the inflation rate has gone up, and I’m told particularly part of that is around energy prices and some of the rising global prices for gas.”
She added: “We’ve obviously got a long way to go in turning round the economy.”
It was put to Dame Diana that Labour’s move to end the VAT exemption for private schools had been blamed in part for the rise.
She said: “I think you have to put it into context. We’ve seen three reductions in interest rates over the time that Labour’s been in power. Wages are growing at the fastest rate for three years, so there is positive news there.
“But I accept that the announcement in the last few minutes is one that we’ve got to work on.”
07:26 AM GMT
Millions of families struggling to make ends meet, says Reeves
Rachel Reeves said her “number one mission” was getting “more pounds in pockets” after inflation increased to 3pc in January.
The Chancellor said:
Getting more money in people’s pockets is my number one mission.
07:24 AM GMT
Private school help drive ‘sharp’ rise in inflation
After inflation leapt to 3pc in January, ONS chief economist Grant Fitzner said:
Inflation increased sharply this month to its highest annual rate since March last year.
07:22 AM GMT
Private school tax raid drives inflation to 10-month high
Inflation jumped to a 10-month high at the start of this year after the Government enforced sharp increases in private school fees.
The consumer prices index (CPI) rose from 2.5pc in December to 3pc in January, according to the Office for National Statistics (ONS), which was its steepest rate since March last year.
The increase, which was larger than economists had expected, comes after the Government ended the long-standing VAT exemption for private schools on January 1.
From the start of this year, many schools passed price increases onto parents after the standard rate of 20pc was applied to private school education and boarding fees.
The ONS said private school fees was the only factor driving up education inflation, which surged by 12.7pc compared to the previous month.
The education sector as a whole saw inflation at 7.5pc as a result - the highest rate since September 2015.
It helped push services inflation up to 5pc from 4.4pc in December.
Services inflation is among the readings closely watched by the Bank of England as it considers interest rate policy in a bid to keep inflation down.
07:04 AM GMT
Good morning
Thanks for joining me. Inflation rose to its highest level in 10-months after the Government ended the VAT exemption for private school fees.
The Office for National Statistics said the consumer prices index jumped from 2.5pc in December to 3pc in January, the highest since March 2024.
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What happened overnight
On Wall Street, the S&P 500 nudged to a record close Tuesday following a choppy session. It veered in and out of negative territory before finishing at 6,129.58, up 0.2oc, narrowly topping its earlier record.
The Dow Jones Industrial Average was flat at 44,556.34, while the tech-rich Nasdaq Composite index edged up 0.1pc to 20,041.26.
In the bond market, the yield on 10-year US Treasury notes rose to 4.552pc from 4.517pc late on Monday.
Asia markets struggled to maintain momentum on Wednesday. Singapore, Shanghai, Seoul, Wellington and Manila rose.
But Tokyo fell as auto firms and semiconductor makers were hit by Donald Trump’s tariff announcement, and Taipei was weighed by a sell-off in chip giant TSMC.
There were also losses in Sydney, Taipei and Jakarta. Hong Kong was dragged down by tech firms after Baidu’s fourth-quarter earnings saw a fall in revenue and a warning of near-term pressures.