UK inflation rises to 3.4%, slowdown still expected
UK inflation climbed to 3.4% in December, up from 3.2% in November, driven by higher airfares and tobacco prices, the Office for National Statistics (ONS) reported.
The increase exceeded the median forecast of 3.3% in a Reuters poll of economists, though services inflation rose as expected to 4.5% from 4.4%, News.Az reports.
Despite the rise, Britain still faces the fastest price growth among the Group of Seven nations, but economists expect inflation to slow sharply in the coming months as last year’s utility cost hikes and other government-controlled tariffs drop out of annual comparisons.
Bank of England (BoE) Governor Andrew Bailey has indicated that inflation is likely to approach the central bank’s 2% target by April or May. Financial markets continue to price in one or two quarter-point interest rate cuts later this year, and analysts see little reason for concern over the latest data. Nicholas Crittenden of the National Institute of Economic and Social Research said: “The Bank of England will ... not be worried by these numbers.”
Tobacco and airfares were the main contributors to December’s headline rise, due to duty increases on tobacco products and seasonal flight timing around Christmas. Overall, Britain’s consumer price and services inflation rates remain slightly below the BoE’s November projections.
In December, the BoE’s Monetary Policy Committee cut the Bank Rate to 3.75%, though nearly half of its members voted for no change amid concerns about persistent inflation pressures. Producer prices showed a sharp rise in the services sector during Q4, climbing to 2.9% from 2.0%, while manufacturing prices remained stable.
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