U.K. Inflation Eases to 10.1 Percent, but Food Prices Push Higher

January was the third month of declines in the inflation rate, but the double-digit increase shows Britain’s cost-of-living crisis persisting.

Britain’s inflation rate slowed for a third consecutive month in January, but the price of food kept rising strongly, exacerbating a cost-of-living crisis.

Consumer prices rose 10.1 percent in January from a year earlier, the Office for National Statistics said on Wednesday. While the rate appears to have peaked in October at 11.1 percent, a 41-year high, British households are still being squeezed by double-digit inflation. Prices rose 10.5 percent in December and 10.7 percent in November.

The annual rate of inflation was pulled down by a drop in air and bus travel prices, as a £2 ($2.42) cap on bus tickets was introduced across much of the country at the start of the year. To a lesser extent, lower restaurant and hotel prices also brought down the inflation rate.

On a monthly basis, the price of food rose another 0.6 percent in January, as the cost of all food categories tracked by the Office for National Statistics other than meat and fish rose. The annual rate of food inflation hovered near the highest level in 45 years, at 16.7 percent.

However, there were some broader signs of easing inflationary pressures. The annual rate of core inflation, a measure of price increases that excludes energy and food costs and is used to indicate how deeply inflation is embedding in the economy, slowed to 5.8 percent in January, from 6.3 percent the previous month. The annual rates of inflation for services eased to 6 percent last month, from 6.8 percent.

In the United States, by comparison, data published on Tuesday showed prices for many goods and services still rising on a monthly basis, even as the overall annual inflation rate slowed slightly in January, to 6.4 percent.

Inflation in Britain is expected to fall sharply later in the year because wholesale energy prices have tumbled since last summer, but Britain’s economy is set to suffer from a prolonged period of high prices and high interest rates, which were imposed to try to restrain inflation. It’s the only major advanced economy that the International Monetary Fund expects to contract this year.

Wages aren’t keeping up with inflation, and mortgage costs for millions of households are expected to increase, weakening consumer spending, while tight financial conditions are likely to discourage business investment.

Although Britain narrowly avoided a recession at the end of last year, the darkening economic outlook is putting pressure on Prime Minister Rishi Sunak.

One of Mr. Sunak’s objectives this year is cutting the inflation rate in half. That shouldn’t be difficult, as the Bank of England, which is charged with maintaining price stability, has already predicted that inflation would decline to 4 percent by the December.

Another 2023 objective — expanding the economy — may be trickier. Next month, the Treasury will publish its next budget, a set of spending and tax proposals that probably have only limited influence on short-term growth prospects. In the near term, Mr. Sunak and his government ministers are under pressure to bring an end to a series of strikes by public-sector workers, among them nurses, ambulance workers and teachers, who have walked off the job over pay.

Last year, Britain lost 2.5 million working days to strikes, according to the statistics agency, the most in more than 30 years.

Pay, once adjusted for inflation, has been falling for a year. In the last three months of 2022, public-sector wages rose 4 percent from a year earlier but were outpaced by double-digit inflation, data published on Tuesday showed. In the private sector, pay growth, excluding bonuses, was about 7 percent, the fastest pace since the pandemic, when lockdowns disrupted employment.

While private-sector pay growth is also lagging behind inflation, it is fast enough to concern policymakers at the Bank of England, who want to prevent inflation from becoming embedded in the economy. They raised interest rates this month to 4 percent, the highest since 2008, citing signs that fast wage growth and inflation in the services sector could mean stubbornly high prices ahead.

But they also softened their language on future rate increases, as inflation appears to have peaked and the British economy still needs to absorb much of the impact of past rate increases.

“We have seen a turning of the corner” on inflation, Andrew Bailey, the governor of the bank, said this month. “But it’s very early days, and the risks are very large.”