UK Inflation Drops to 10.5% in December Food prices skyrocket
UK inflation eased last month After hitting its highest level in 41 years in October. This made the Bank of England feel a bit more comfortable. But the pressure on households remains intense. as food and beverage prices rose at their fastest pace since 1977.
Annual consumer price inflation fell to 10.5% in December from 10.7% in November. The National Bureau of Statistics said on Wednesday. That fell in line with economists’ expectations in a Reuters poll.
However, as falling oil and clothing prices have pushed the headline rate down, But the cost of food and non-alcoholic beverages was 16.8% higher than a year earlier, the sharpest increase since September 1977, led by eggs, milk and cheese.
The Bank of England forecast in November that headline CPI would fall from a peak of 11.1% in October last year to around 5% by the end of 2023 as energy prices stabilize.
but Policymakers have warned As inflationary pressure continues to increase due to a tight job market and other factors. And financial markets expect the central bank to raise its key interest rate to 4% on Feb. 2 from 3.5%.
“A lower overall rate (CPI) … may reduce the risk of the wage price spiral. But these numbers indicate the BoE’s work is not done yet,” said HSBC senior economist Liz Martins.
Sterling strengthened against the US dollar after the data.
British inflation in December was higher than the annual rate of 6.5% in the United States and 9.6% in Germany.
Although natural gas prices are lower than they were a year ago. Before Russia invades Ukraine But it is still many times higher than it was in the middle of 2021 and the impact of such increases continues to affect the economy.
The Core Consumer Price Index (CPI), which excludes energy, food, alcohol and tobacco, is seen by some economists as a better guide to core inflation. unchanged at 6.3% in December. This is contrary to what economists had expected to fall to 6.2%.
Service Price Inflation This is seen by some BoE officials as a sign of steadily increasing inflationary pressures. and secondary effects of higher energy costs and wages. It rose to its highest level since March 1992 at 6.8%.
Treasury Secretary Jeremy Hunt said after the figures were released that The inflation rate is high. The “nightmare for the family budget” affects business investments. and led to a strike.
“No matter how hard it is We have to stick to our plan to break it down,” he said.
Hunt resisted wage demands from public sector unions. Many of which are carrying out strikes as member wages are rising at a slower rate than inflation and less than the private sector average.
Retail price inflation (RPI), used as a benchmark for negotiating some payments, was 13.4% in December, down from 14.0% in November.
The UK economy is expected to contract this year. As inflation squeezes disposable income and the BoE expects unemployment to rise. Factors that some BoE policymakers say need little or no stricter.
Other members of the MPC think it may be a harder task to get inflation back to 2% as wages are rising at their fastest pace in more than 20 years.
“Evidence this week suggests bold action is needed,” said Hugh Gimber, global market strategist at JP Morgan Asset Management, who expects the BoE to raise interest rates to at least 4.5% before halting.