Inflation holds at 3% as family day out costs offset weaker fuel rises

Inflation remained unchanged at 3% last month adding further pressure on the Bank of England for an interest rate rise.

Figures from the Office for National Statistics (ONS) showed Consumer Price Index (CPI) inflation was driven up by expensive tickets to family attractions though this was offset by weaker fuel price rises.

It means CPI remains 1% higher than the Bank of England's 2% target.

Economists had on average expected it to fall back slightly to 2.9%.

Inflation reached its highest level since 2012 in November at 3.1% and it has since remained stubbornly close to that level.

Prices have been pushed higher since the Brexit referendum in June 2016 resulted in a collapse in the value of the pound, making imports more expensive.

In January, the main upward pressure came from the cost of entrance fees to recreational venues such as zoos and gardens, for which prices fell by less than they did a year ago.

There were also weaker drops in the price of clothing and air fares compared with the same month last year..

CPI measures the growth in the price of everyday items including fuel, food, clothing and household goods.

The latest figures show a continuation in the squeeze on household budgets, as the rise in the cost of living remains higher than wage growth.

Sterling rose 0.3% against the dollar to $1.38 following the figures. Against the euro, the pound was trading flat at €1.12.

Last week the Bank of England - which raised interest rates in November for the first time since 2007 from 0.25% to 0.5% - signalled that a further hike might come sooner rather than later.

Many experts now expect an increase to come in May.

Ben Brettell, senior economist at Hargreaves Lansdown (Frankfurt: DMB.F - news) , said following the latest inflation: "Inflation's now been above target for 12 straight months.

"This adds further weight to the case for higher interest rates sooner rather than later."

Chris Williamson, chief business economist at IHS Markit (Stuttgart: A1139A - news) , said a May rate rise was "by no means a done deal" and the Bank would want to see "the economy's health improve to be sufficiently reassured that the economy is ready for another rise in borrowing costs".

Mel Stride, Financial Secretary to the Treasury, said: "The good news is that inflation is expected to fall this year.

"We are helping cut costs for hard pressed families by boosting pay, cutting taxes for millions of people and freezing fuel duty at the pumps. This is all part of our plan to build an economy that works for everyone."