- CPI rose to 4% in year to December
- Core inflation held steady at 5.1%
- Food inflation fell but still eye wateringly high at 8%
Danni Hewson, head of financial analysis at AJ Bell, comments on the latest UK inflation figures:
“It’s a tiny spike but psychologically it’s a mountain. Households had begun to hope the colossal hikes that had taken a salami slicer to their budgets over the past year might finally be in the rear-view mirror.
“People know prices are still rising, you can’t do your weekly shop without accepting that, but the moment at the checkout when the cashier tots up the damage had begun to feel a little less overwhelming.
“Even those who aren’t glued to the news on their phones throughout the day will have gleaned that the situation in the Red Sea is something that might have a tangible impact on everyday life.
“But that disruption wasn’t captured by these figures, other factors were at play in December. One is a UK quirk – the impact of increased duty on tobacco products created the lion’s share of last month’s hike.
“But it’s the uptick in service inflation which will trouble Bank of England policy makers. That’s the sticky bit that will make the last few percentage points harder to whittle away.
“The UK isn’t alone, other countries including the US have found themselves in the same situation, and it seems the path to that hoped for ‘soft landing’ will have a few detours. Whilst markets are still hopeful rate cuts will come thick and fast later this year, the date for that to commence has slipped back.
“Looking forward there are so many variables at play, central bankers are likely to want to keep their powder dry for as long as they can. But walking that tightrope has just got a little bit harder as we wait and see whether the situation in the Middle East escalates or if a quick solution can be found.”
