The latest inflation figures gave sterling a shot in the arm today.

A short time ago, the pound was trading at 1.7395 against the US dollar, up from 1.7333 during early trading this morning.

The consumer price index (CPI), which is the government's preferred measure of inflation, stood at 1.9 per cent in January, unchanged from the revised December figure, the Office of National Statistics (ONS) said. 

Despite high fuel prices, cost-cutting in the retail sector has helped to keep inflation in check and under the Bank of England's two per cent target.

This means that the bank's monetary policy committee (MPC) is now more likely to cut interest rates in the coming months.

"Today's inflation report from the Bank of England plays down the fear expressed last autumn that higher energy prices would trigger higher wage settlements," said Dr John Philpot, chief economist at think tank, the CIPD.

"Moreover, with output now rising faster than employment, productivity should be starting to recover from last year's trough, thereby dampening growth in unit wage costs."

Analysts remain divided over when that move will come. At its meeting this month the committee voted to leave the base rate unchanged at 4.5 per cent.