Inflation in the UK climbed to a 10-month high in January, according to official data released on Wednesday, a development that is likely to temper expectations of swift interest rate cuts from the Bank of England, reports AP.

The Office for National Statistics reported that inflation, as measured by the consumer prices index, increased to 3% in the year to January, up from 2.5% the previous month.

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This rise, which pushed inflation further beyond the bank’s 2% target, was primarily driven by higher airfares, food costs, and private school fees following the new Labour government’s decision to introduce a sales tax.

While economists had projected an increase to 2.8%, the magnitude of the surge has been unexpectedly high and is likely to raise concerns among central bank policymakers, particularly as they continue to express apprehensions about the UK's sluggish economic growth.

Earlier this month, the bank reduced its main interest rate by a quarter of a percentage point to 4.50%—its third cut in six months—after slashing its 2025 growth forecast for the UK to 0.75%.

If growth remains weak, it will be a significant setback for the UK’s new Labour government, which has prioritised economic expansion as a means of improving living standards and generating revenue for underfunded public services. As growth remains elusive, the party’s popularity has declined sharply since its election victory in July.

The government will undoubtedly hope that the central bank provides support by further reducing interest rates, as this would lower mortgage costs and make borrowing more affordable, albeit at the expense of reduced returns for savers.

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Most economists expect inflation to rise further in the coming months due to increasing domestic energy bills, before beginning to decline in the latter half of the year. This should provide policymakers with scope to cut interest rates again—though possibly fewer times than previously anticipated.

“A rate cut in March now seems highly unlikely, with the bank maintaining its cautious approach to easing for the time being,” said Luke Bartholomew, deputy chief economist at abrdn, formerly Aberdeen Asset Management. “However, whether the pace of rate cuts accelerates later in the year will depend on inflationary pressures returning towards 2%.”