The UK’s headline rate of inflation remained at 4% in the year to January, a level unchanged from the rate in the 12 months to December 2023.

According to new figures published by the Office for National Statistics (ONS), Consumer Prices Index (CPI) inflation also fell by 0.6% on a monthly basis in January.

While inflation remains at twice the rate of the Bank of England’s 2% target, there had been many economic forecasters expecting a small rise in January’s rate of annual price increases, amid higher gas and electricity charges.

The unchanged annual rate between December and January was a result of the 0.6% fall in prices on the month, which the ONS data showed was the same rate of change as it was between December and January a year ago.

Mortgage operations manager at Wesleyan Financial Services, Clare Batchelor, said that while the latest data could cause some “alarm”, the underlying causes might also give room for “optimism”.

“One of the key factors propping up inflation was a seasonal rise in energy costs, which make up a significant chunk of household outgoings,” Batchelor commented.

“The Energy Price Cap went up 5% in January, but it is expected to fall by as much as 16% in April, with another reduction forecast for the summer. With food inflation continuing to slow as well, we can expect positive news on inflation in the months ahead.

“Against this backdrop, the BoE is still likely to start cutting interest rates this year, to the relief of many mortgage holders. The only question is when. Those looking to remortgage, or get on the housing ladder, should continue to review their options so they’re ready to quickly take advantage of better deals.”

Head of savings at Shawbrook, Adam Thrower, also noted inflation not increasing, coupled with still relatively high interest rates, would be “good news for savers”.

However, he also warned: “A significant 40% of savers don’t even know what rate they’re receiving on their savings, so it’s likely they’re losing out. Regularly monitoring your savings rate and exploring the market is crucial, else it may result in missed opportunities, potentially losing out on substantial interest earnings. It could be hundreds of pounds you're leaving on the table. Take control of your savings, make that money of yours work a bit harder – it's worth it.”

The ONS also reported that food inflation fell to 7% in January, down from 8% in the year to December. The latest food inflation figure is the lowest annual rate since April 2022, and the fall means the annual rate has eased for the tenth consecutive month.

Previously, food inflation hit a recent high of 19.2% in March 2023, the highest annual rate seen for over 45 years.

Head of financial analysis at AJ Bell, Danni Hewson, added: “The best news for all households came from falling food inflation, with prices actually coming down on a month-by-month basis for the first time in more than two years, a factor which helped offset other cost pressures.

“There might be a couple of plot twists, a little added suspense, but simple arithmetic suggests that inflation will continue to edge closer to the BoE’s 2% target as the year goes on.”

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