LONDON — Britain’s inflation rate fell to a weaker-than-expected 2.5% in December, with core price growth slowing further, according to data released Wednesday by the Office for National Statistics.
The consumer price index (CPI) rose to 2.6% in November, with economists polled by Reuters expecting the December figure to remain unchanged.
Core inflation, which excludes more volatile food and energy prices, was 3.2% in the 12 months to December, down from 3.5% in November.
The UK’s inflation rate hit a three-year low of 1.7% in September, and since then, monthly prices have declined due to soaring fuel costs and service charges rising faster than commodity prices. It’s rising. The annual services inflation rate was 4.4% in December, down from 5% in November.
of british pound As of 7:15 a.m. London time, immediately after the announcement, the dollar was down 0.3% against the dollar.
Commuters (left) cross an intersection near the Bank of England (BOE) on Wednesday, May 8, 2024 in London, England. Bank of England policymakers appear to be at their most divided since the end of a hiking cycle last year, as Governor Andrew Bailey faces a possible rate cut in coming weeks. It shows the issues to be solved. Photographer: Holly Adams/Bloomberg via Getty Images
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The data will give the Bank of England something to consider ahead of its next meeting on February 6. At the meeting, the central bank is expected to cut its key interest rate from 4.75% to 4.5%, despite inflationary pressures such as resilient wages, growth and uncertainty in the UK economic outlook. The central bank’s inflation target is 2%.
Britain’s economy has been in trouble recently, with economists concerned about the country’s prospects for slowing growth and the risk of headwinds caused by both external factors and domestic finances, such as potential trade tariffs once President-elect Donald Trump takes office. has expressed concern about and the economic challenges that have bedeviled the Labor government and the Treasury since the October Budget.
Following the latest data, British Prime Minister Rachel Reeves said on Wednesday that there was “more work to do to help families across the country pay their bills” and that economic growth was Britain’s priority.
The data will be “welcome news” to Rachel Reeves, said Ruth Gregory, deputy chief UK economist at Capital Economics, who said underlying price pressures were “slightly more favorable than we thought. It seems so.” he commented.
In emailed comments, he said the result strengthens the possibility that the BOE will cut interest rates by 25 basis points in February and “reinforces our view that rates will fall more rapidly than the market expects.” This has been corroborated to some extent.”
“Our forecast is that CPI inflation will likely recover to near 3.0% in January, and inflation will be slightly higher than most expect in the first half of this year, but we expect it to remain below our 2% target next year. “Inflation will become less sustainable,” she said.
financial challenges
Tax hikes announced by the government last autumn, which are due to come into force in April, have sparked unrest among British businesses, who warn they will hurt investment, jobs and growth.
Britain has also seen borrowing costs and a weaker currency amid uncertainty over the country’s economic outlook and fiscal plans, posing a dilemma for Chancellor of the Exchequer Rachel Reeves’ ambition to balance the budget.
Mr. Reeves has vowed to adhere to self-imposed fiscal rules to ensure that day-to-day spending is met entirely from revenue and that government debt is on the decline. She may now have to decide whether to adjust or break these restrictions.
The choice she faces is to do nothing and hope the unfavorable borrowing situation subsides, to raise taxes further (a move likely to invite further criticism from businesses and the public), or to raise taxes, a move that is likely to lead to further criticism from businesses and the public, or to do something that the government is already considering. However, this is contrary to the Labor Party’s anti-austerity stance. Reeves said over the weekend that the budget’s fiscal rules are “non-negotiable,” adding that “economic stability is the foundation of economic growth and prosperity.”
Ben Zaranko, deputy director of the Institute for Fiscal Studies, said Mr. Reeves faces “quite unenviable choices.”
“This unfortunate predicament is primarily the result of difficult fiscal succession and global economic factors,” he said in a comment.
“But it also reflects a series of government choices and mutually contradictory commitments: adhering to strict numerical fiscal rules while leaving only slim margins for them; The priority is to avoid imposing another round of austerity and to reduce fiscal spending. We should impose the maximum tax, not raise taxes again after the autumn budget, hold fiscal events only once a year, and if rising interest rates eliminate so-called “headroom”, then what? “We’re going to have to do something,” Zaranko added.
