Why I’m banking on a sudden fall in inflation

The January rate has remained at 4 per cent, with a shallow recession likely by the end of the year – but, says James Moore, if you look closely, the economy is showing signs of recovery

Food prices have eased slightly – the first decrease since September 2021 (PA)

The headlines will tell you that the January rate of inflation came in unchanged at 4 per cent. Context, however, is everything – and that actually represents a good result. Those of us who watch these numbers – yes, it’s a glam life that I lead – will tell you that we were expecting to see an increase this month, albeit a temporary one.

The biggest driver for the recent, very welcome, downward trend from the peak of 11.1 per cent recorded in October 2022 has been falling energy prices and an end to last year’s power price spike that left people shivering in chill homes, even after the government stepped in to subsidise sky-high bills. However, that went into reverse in January with a rise in Ofgem’s price cap. For the first time in many months, energy pushed inflation higher.

Fortunately, this was offset by heavy discounting in the furniture sector and, best of all, a monthly fall in food prices. For the first time since September 2021, January saw the first monthly fall in food prices – with the price of crackers, cake and crisps leading the charge and helping to offset the rise in electricity and gas.