UK inflation unexpectedly cools to 2.5%, core price print slows further

The consumer price index (CPI) rose to 2.6 percent in November, with economists polled by Reuters expecting December’s reading to be unchanged.

Core inflation, which includes more volatile food and energy prices, came in at 3.2 percent in the twelve months to December, down from 3.5 percent in November.

UK inflation fell to a three-year low of 1.7% in September, with monthly prices rising since then as higher fuel prices and fees for services rose faster than goods prices. is In December, the annual services inflation rate was 4.4 percent, down from 5 percent in November.

gave British pound It was up 0.1 percent against the dollar at 8:15 a.m. London time, after reversing early losses earlier in the session. Data release.

The data will be something for the Bank of England to ponder ahead of its next meeting on February 6. The central bank is expected to cut the key interest rate to 4.5% from 4.75%, despite inflationary pressures, such as flexible wage growth and uncertainty over the UK’s economic outlook. The central bank’s inflation target is 2 percent.

The UK economy has found itself in a tight spot of late, with economists expressing concern Slow growth prospects of the country and concerns arising from both external factors, such as potential trade tariffs after President-elect Donald Trump takes office, and Domestic fiscal and economic challenges that have dogged the Labor government and the Treasury since October’s budget..

Responding to the latest figures, British Chancellor Rachel Reeves said on Wednesday that “there is still work to be done to help families across the country with their living costs,” and that economic growth was Britain’s priority. was

UK Economist Ruth Gregory, deputy chief of capital economics, commented that the data would be “welcome news” for Rachel Reeves, with prices The underlying pressure appears to be “a bit more favorable than we thought.”

That reading bolstered the case for a 25 basis point interest rate cut by the BOE in February, he said in emailed comments, “and lends some support to our view that rates are higher than markets expect.” And will fall fast.”

“Our forecast is that CPI inflation will pick up in January, probably around 3.0% and that inflation will be slightly higher than most expected in the first half of this year. But we expect it to pick up next year. 2% will fall below the target. Inflation is further reduced,” he said.

Tax hikes announced by the government last autumn, which are due to come into effect in April, have fueled anxiety among British businesses who warn that investment, jobs and growth will stagnate.

Britain has seen its borrowing costs and currency weaken amid jitters about the country’s economic outlook and fiscal plans. Finance Minister Rachel Reeves’ ambitions to balance the budget face a dilemma.

Reeves has vowed to maintain self-imposed fiscal rules to ensure that all day-to-day spending is covered by revenues and that government debt continues to spiral downward. She may now be forced to decide whether to break these restrictions.

The choice he faces is to do nothing and hope that lending conditions ease, raising taxes further – a move that will draw further criticism from businesses and the public. It could – or cut public spending, a step already taken by the government but which goes against Labour’s anti-“austerity” position. last weekend, Reeves said the fiscal rules laid out in the budget were “non-negotiable.” “Economic stability is the foundation of economic growth and prosperity,” he added.

Ben Zranko, associate director of the Institute for Fiscal Studies, said Reeves faces “an unenviable set of extremists.”

“This unfortunate situation is largely the result of a difficult financial legacy and global economic factors,” he said in the comment.

“But it also reflects government choices and a series of mutually contradictory commitments: sticking to a strict, numerical fiscal rule while leaving only the best margins against it; prioritizing public services and imposing a second round of austerity. Avoiding the biggest tax, and not raising tax again after the Autumn Budget and holding only one financial event a year if the interest rate is high, eliminates so-called ‘headroom’, something has to be given. Ga,” Zranko added said