UK Inflation Rises to 4% Year-On-Year in December
The latest figures from the Office for National Statistics show that UK inflation unexpectedly increased to 4% year-on-year in December. This was the first rise in the annual consumer price index since February 2023 and came after a sharper-than-expected fall in November.
Economists had anticipated a decline to 3.8%, but the annual headline CPI actually rose. The month-on-month CPI also exceeded expectations, with a 0.4% increase compared to a consensus forecast of 0.2%.
Alcohol and tobacco prices were the main drivers of the increase, while food and non-alcoholic beverages contributed to a slight decrease. The closely watched core CPI, which excludes volatile items like food, energy, alcohol, and tobacco, rose to an annual 5.1%.
However, experts believe that inflation is still on track to return to the Bank of England’s 2% target as early as April. Despite the unexpected rise in December, it is expected to fall at a decent pace after that, helped by lower energy bills and food inflation.
The Bank of England is set to hold its next monetary policy meeting on February 1 after raising interest rates over the past two years to combat inflation.
Finance Minister Jeremy Hunt stressed the importance of sticking to the government’s plan to control borrowing and boost growth. The recent rise in inflation is also a reminder of the need to continue efforts to combat high inflation.
Despite challenges such as ongoing tensions in the Red Sea and declining job vacancies, economists are optimistic that inflation will ease throughout the year. It is likely that the Bank of England will respond to easing inflation pressures by lowering their projections in the upcoming Monetary Policy Report, potentially leading to rate cuts in the coming months.
In summary, the unexpected rise in inflation in December was a reminder that the struggle against soaring inflation is not over. However, experts remain confident that inflation will ease throughout the year, and the Bank of England is expected to respond to these changes with potential rate cuts in the near future. As always, the economic landscape is ever-changing, and we will continue to monitor the situation closely.
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