Official figures revealed a stronger-than-anticipated increase in UK consumer prices for December, adding uncertainty to the timing of possible Bank of England rate cuts. While the headline inflation rate was higher than forecast, services inflation met analyst predictions.
According to the Office for National Statistics, the Consumer Prices Index climbed to 3.4% in December, up from 3.2% a month earlier. Economists had anticipated a smaller gain. On a monthly basis, prices increased by 0.4%.
Core inflation—which strips out fluctuations in energy, food, alcohol, and tobacco prices—was unchanged from the previous month, remaining at 3.2%.
The data highlighted notable contributions from higher alcohol, tobacco, and transport costs, which were among the largest drivers of the increase in December consumer prices.
Services inflation, a key metric for the BoE due to its focus on domestic price pressures, edged higher to 4.5% from 4.4% in November, aligning with market forecasts.
Earlier labor market figures released this week indicated a continued slowdown in employment growth. Together with the latest inflation data, the prospects for a BoE policy rate reduction in February have become less certain, fueling speculation the central bank might delay any move.
