The United Kingdom's Consumer Price Index (CPI) increased in January, sending the country's inflation rate for the month to a six-month high. The surge was partly caused by the continued increase in fuel and home prices.

According to the UK's Office for National Statistics, CPI stood at 1.8 percent in January. This represented a 1.3 percent increase when compared to the previous month. The agency confirmed in a statement that the rise in inflation was the result of higher fuel prices last year. The increase in the UK's CPI was higher than the initial analysts' forecast of 1.6 percent for January.

The report revealed that fuel prices for the month of January rose by up to 4.7 percent when compared to the same month a year earlier. This marked the highest rise in prices on a year-on-year basis since November 2018.

The impact of the price increase on UK households was fortunately mitigated by the recently imposed energy price cap by the energy regulator Ofgem. Under the measure, average UK households cannot be charged more than £1,137 per year for gas and electricity.

Along with fuel prices, home prices across the region also increased in January. The agency noted that it was the first time that this has happened in close to two years. The cost of living for January did decline slightly, but this is normally observed during the month due to the decrease in demand for goods and services following the holiday season.

The inflation data released on Wednesday was fortunately below the 2 percent target for inflation set by the Bank of England. However, the report still managed to push the value of the country's currency above $1.30. The currency also fell by 0.25 percent against the euro during the start of the day's trading. It eventually recovered and traded flat against the euro during the rest of the day.

 Analysts have pointed out that the new figures reported by the Office of National Statistics will likely have no bearing in the central bank's previous decision on the country's interest rate adjustment next month.

The country's inflation rate is a major factor that influences the Bank of England's Monetary Policy Committee (MPC) and its decision in setting the nation's base rate. If inflation remains under the 2 percent mark, the bank may cut interest rates lower to encourage further spending. For this year, economists expect the central bank to remain cautious and to leave the current interest rates at their current value. The UK's base rate currently stands at 0.75 percent. The central bank is expected to hold its next meeting on March 26.