UK CPI: inflation slows more than expected

Annualised inflation came in at 2.5% in December, down from the 2.6% reported in November.
Annualised inflation was forecast to come in at 2.6% (Trading Economics).
Core Inflation came in at 3.2% in the 12 months to December 2024, down from the 3.5% in November and lower than forecast.
Nicholas Hyett, Investment Manager, Wealth Club

“UK inflation came in lower than expected in December, with price increases slowing across broad swathes of the economy including the hospitality sector, clothing and alcohol & tobacco. The slowdown will be very welcome for the government. It increases the scope for the Bank of England to cut interest rates, boosting growth and lowering the cost of borrowing. That would create a little more financial headroom for the Chancellor and reduce the need for substantial cuts to public spending.

However, we think there’s a significant risk that inflation kicks off again later in the year. Employers are set to start paying higher rates of National Insurance in April, pushing up labour costs. That is likely to see prices rise in sectors like hospitality and retail that employ substantial numbers of people and wear margins are already pretty thin. That risks sparking an inflationary spiral. It could be a tense few months as we wait and see how things play out”