UK inflation rises to highest rate in 10 months as millions to be hit with bill hikes – what it means for your money
THE UK's rate of inflation has increased in a hit for households - we reveal what it means for your money.
The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measured 3% in the 12 months to January.
This was up 0.5 percentage points from December, when inflation sat at 2.5% and is the highest level in ten months.
The latest figure is well above the Bank of England's 2% target and puts pressure on under-fire Chancellor Rachel Reeves.
Meanwhile, inflation is expected to hit 3.7% in the summer, driven by increases in the price of energy and food.
Grant Fitzner, chief economist at the ONS, said: "Inflation increased sharply this month to its highest annual rate since March last year.
Read more on inflation
"The rise was driven by air fares not falling as much as we usually see at this time of year, partly impacted by the timing of flights over Christmas and New Year."
He added that this was the weakest January dip since 2020.
Fitzner said the cost of food and drink added to the increase in inflation.
"After falling this time last year, the cost of food and non-alcoholic drinks increased, particularly meat, bread and cereals.
"Private school fees were another factor, as new VAT rules meant prices rose nearly 13% this month."
The ONS' latest data also reveals core CPI inflation, which strips out energy, food, alcohol and tobacco, rose by 4.6% in the 12 months to January 2025, up from 4.2% in December 2024.
The news will come as a blow to millions of households who will see their broadband and mobile bills rise as a result.
Fraser Kerr, regional director scotland & head of financial consultants at abrdn, said: "Inflation rising isn’t what anyone wanted, particularly after a period where it appeared to be stabilising.
"This will bring more pain for households that are already under pressure to keep spending under control. Higher inflation means higher prices."
What it means for your money
Inflation is a measure of how much the cost of goods and services is rising or falling over time.
Rising inflation is bad for households as it means their everyday spending power is eroded.
For example, if it rises it means the cost of your weekly shop has increased.
As inflation has risen it means the cost of living is still increasing at a faster pace than before - which is bad news for your budget.
January's CPI measure of inflation is particularly important as several broadband and mobile firms use it to decide how much to increase contracts by every April.
O2 and Vodafone hike their prices based on the January measure of CPI.
Most broadband and mobile customers are still on contracts with annual price rises linked to inflation.
READ MORE SUN STORIES
It is estimated that customers on inflation-lined contracts will likely pay out an estimated total of £64million more on their broadband and mobiles per month from April.
In real terms bills are set to increase by an average of £21.99 per year for broadband and £15.90 a year on average for mobiles.
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we're earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.