CPI annual inflation – the Government's target measure – remained unchanged at 1.9 per cent in January.
The largest upward effect on the CPI annual rate came from transport. Fuel prices rose this year, with the average price for a litre of ultra-low sulphur petrol up by around 1.7p; last year prices fell by around 3p per litre. In addition, airfares fell by less than last year, back close to their November levels. This followed a smaller than usual increase in fares in December 2005, particularly on international routes.
A further large upward effect came from changes in the cost of fixed landline telephone charges this year.
Downward pressure on the CPI annual rate came from furniture and furnishings, where prices fell by more than a year ago, and from miscellaneous goods and services mainly due to financial services, where last year's increases in overdraft fees were not repeated this year, and other miscellaneous services.
Further downward pressure came from recreation and culture, in particular games, toys and hobbies and, to a lesser extent, cultural services, major durables for outdoor recreation and package holidays. A large partially offsetting upward effect came from recording media.
Additional downward contributions came from changes in the price of food, in particular vegetables, and from clothing and footwear, with prices for women's and children's outerwear falling by more than a year ago.
RPI inflation rose in January to 2.4 per cent from 2.2 per cent in December. Upward pressures were similar to the CPI but some downward pressures were less pronounced, particularly the contributions from financial services and other miscellaneous services, which are both lower weighted in the RPI, and furniture where the downward pressure in the CPI was amplified by an increase in the weights. RPIX inflation – the all items RPI excluding mortgage interest payments – rose to 2.3 per cent in January, from 2.0 per cent in December.
As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate is around the average for the European Union as a whole. The provisional inflation rate for the enlarged EU 25 in December was 2.1 per cent, compared with the UK figure for the same month of 1.9 per cent.
Notes: CPI is the consumer prices index. It is the measure adopted by the Government for its UK inflation target. The Bank of England's Monetary Policy Committee is required to achieve a target of 2 per cent, subject to a margin of one percentage point on either side. Prior to 10 December 2003, the CPI was published in the UK as the harmonised index of consumer prices (HICP).
Starting from the release of the CPI for January 2006, the index level has been rebased to 2005=100. Due to rounding effects, around one third of historical 12-month inflation rates have changed, including the all items figure for December 2005 which has been revised from 2.0 per cent to 1.9 per cent.
RPI is the retail prices index - the uses of the RPI and its derivatives include indexation of pensions, state benefits and index-linked gilts.
Inflation is the percentage change in the index compared with the same month one year previously.