“Like a tall man in a cramped cottage, we were braced for a bump,” declared stockbroker Hargreaves Lansdown’s Sarah Coles today.

The expected bump to which she was referring was a projected rise in annual UK consumer prices index inflation to 4.2% in January, from 4% in December.

In the end, the “bump” never came, with annual CPI inflation remaining at 4% last month in spite of both a hike in household electricity and gas bills in January arising from an increase in regulator Ofgem’s energy price cap and base-year effects.

Any downside surprise on inflation has in recent times been a great relief, given not only the scale of the UK’s cost of living crisis but also the toll which the consequent surge in benchmark interest rates has been taking on many households and businesses.

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Opinions among economists were somewhat mixed about exactly where interest rates will go from here in the wake of the latest inflation data today from the Office for National Statistics, although the debate is not now around direction but about the timing of cuts.

Martin Beck, chief economic advisor to the EY ITEM Club think-tank, said: “January’s increase in the Ofgem energy price cap and unusually large falls in some services prices in January 2023, which weren’t repeated in the same month this year, meant forecasters had been almost unanimous in expecting inflation to rise again in January. However, the CPI measure was unchanged from December’s 4%.”

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Noting that the EY ITEM Club expects annual CPI inflation “should fall to, and perhaps even below, the Bank of England’s 2% target over the next few months”, he added: “Overall, the latest inflation data should reassure the MPC that the time to start cutting interest rates is approaching. The EY ITEM Club continues to expect the first cut in Bank Rate in May.”

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The Bank of England has hiked UK base rates from a record low of 0.1% in December 2021 to 5.25%.

Summing up its view, the EY ITEM Club said: “The continued decline in wholesale gas prices points to energy bills falling even more significantly this year than previously expected. Data for the last few months shows wages growth falling fast. And as things stand, the inflationary impact of ongoing geopolitical tensions should be fairly limited. The ingredients remain in place for the Monetary Policy Committee to start cutting interest rates in the next few months.”

Mr Beck observed that annual core inflation, which he noted strips out the volatile food and fuel categories and provides a better guide to underlying price pressures, was also unchanged at 5.1% in January.

He said: “Lower wholesale gas prices mean energy bills are on course to fall by around 15% in April when the Ofgem cap, which governs the typical household energy bill, is recalculated. And if the most recent decline in gas prices, which are now well below levels just prior to Russia’s invasion of Ukraine, is maintained, another double-digit-percentage fall in bills could be on the cards for July.”

However, Ms Coles, head of personal finance at Hargreaves Lansdown, declared that inflation was expected to “bounce back and take a while to drop back again” after its projected fall towards target in the spring.

She said: “The Bank of England has already said it’s not going to cut in a hurry. A surfeit of caution means they won’t cut until lower inflation has bedded in, and we’re a fair way from that. There are still some economists forecasting a cut as early as May, but there’s every chance we won’t see this until the second half of the year. The market has also started pricing in fewer rate cuts by the end of the year.”