Inflation remains at 2.7% despite inflation remaining well above Bank of England's target

The Bank of England is set to keep interest rates on hold for the foreseeable future despite inflation remaining well above the central bank’s 2 per cent target last month.

Annual CPI inflation was 2.7 per cent in January, unchanged for the fourth month in a row, according to the Office for National Statistics. The Bank’s rate-setting Monetary Policy Committee released a statement last week, after when it voted kept its £375bn quantitative easing policy on hold, warning that inflation could remain above target for the next two years.

The largest upward pressure on prices last month came from air fares and alcohol, according to the ONS. Drinks prices rose 4.3 per cent  as pre-Christmas discounts came to an end. The rate of RPI inflation increased to 3.3 per cent , from 3.1 per cent the previous month.

The ONS noted that this was the longest period over which CPI inflation had remained unchanged since 1996. City analysts had expected a slight increase in the main inflation measure to 2.8 per cent.

From next month the ONS will publish a new series, called RPIJ, which most analysts regard as a statistically superior gauge of rises in the cost of living.