Lower cost of tea eases January price rises

Shop prices rose at their slowest rate in more than 18 months in January, according to the latest report from the British Retail Consortium (BRC).

Inflation - the rate at which prices rise - reached near-record highs last year, prompting a cost-of-living crisis.

However, discounts and lower prices for milk and tea saw shop price inflation fall to 2.9%, from 4% in December.

Overall, prices are still going up in the shops but at a slower rate.

On average, food prices are still rising by more than 6% a year.

The BRC - which represents some of the UK's biggest retailers - said shop price inflation in January was as its lowest level since May 2022.

Discounts after New Year also helped to slow down the rate of price increases for non-food products, which eased to 1.3%, down from 3.1% the month before.

However, the BRC warned in its report that many households had not felt the benefit of lower inflation, adding there were risks price rises could accelerate once more.

Helen Dickinson, chief executive of the BRC, said progress in slowing price rises will likely be "hampered" by other cost pressures, including implementing the increase in the National Living Wage, and an increase in business rates in April.

"Rising geopolitical tensions will also add to uncertainty and costs in supply chains. With a general election later this year, we want to see political parties outline how they will help unlock investment across the country, rather than the current trajectory, which is doing just the opposite," Ms Dickinson said.

Some analysts fear inflation will stay elevated, following attacks on ships using a vital trade route through the Red Sea.

Several shipping firms have stopped vessels using the route after the attacks by Houthi rebels in Yemen. Last week, the US and UK launched military strikes against the Houthis.

However, although tobacco and alcohol prices remain high, there is some hope that headline inflation could fall to nearer the government's 2% target as energy bills are predicted to come down in 2024.

Some analysts have said lower inflation would fuel hope that the Bank of England could cut its key interest rate, which currently stands at a 15-year high.

The Bank of England has repeatedly raised rates in a bid to tackle inflation, which has strained the finances of UK households over the past two years.