LONDON – UK inflation fell below expectations to 2.5% in December, data from the Office for National Statistics showed on Wednesday.
The consumer price index (CPI) rose to 2.6% in November, and economists polled by Reuters expected the December figure to remain unchanged.
Core inflation, which excludes volatile food and energy prices, was 3.2% in the 12 months to December, down from 3.5% in November.
British inflation hit a more than three-year low of 1.7% in September, with monthly prices rising since then as fuel costs and service charges rose faster than commodity prices. Annual service sector inflation was 4.4% in December, down from 5% in November.
this GBP Shortly after the sale, it fell 0.3% against the dollar at 07:15 am London time.
The data will be worth the BoE’s careful consideration ahead of its next meeting on February 6. Despite inflationary pressures such as strong wage growth and uncertainty about the UK’s economic outlook, the Bank is expected to cut its key interest rate to 4.5% from 4.75%.
The U.K. economy has found itself in trouble of late, with economists expressing concern about the country’s weak growth prospects and worries about headwinds from external factors, such as trade tariffs that could be imposed if President-elect Trump takes office, as well as internal fiscal problems.
Plans to increase taxes announced by the government last autumn will come into effect in April, causing panic among British businesses who warned investment, hiring and growth would be hampered.
Britain’s borrowing costs and currency also weakened amid concerns over the country’s economic outlook and fiscal plans, That puts Treasury Secretary Rachel Reeves’ ambitions to balance the budget in a quandary.
Reeves has vowed to abide by self-imposed fiscal rules to ensure all day-to-day spending is met by revenue and government debt is on a downward trend. She may now be forced to decide whether to adjust or break those limits.
The choice she faces is to take no action and hope that unfavorable borrowing conditions subside, raise taxes further (a move that is likely to attract more criticism from business and the public), or cut public spending (a step the government has proposed but would be contrary to At the end of last week, the Labor Party’s anti-austerity stance was confirmed. Reeves says fiscal rules set out in budget are ‘non-negotiable’ And added, “Economic stability is the cornerstone of economic growth and prosperity.”
Ben Zaranko, deputy director of the Institute for Fiscal Studies, said Reeves faced “a pretty enviable set of choices.”
“This unfortunate predicament is largely the result of financial inheritance difficulties and global economic factors,” he said in comments.
“But it also reflects a series of government choices and mutually incompatible commitments: insisting on strict, digital fiscal rules while retaining only the best profits; prioritizing public services and avoiding another round of austerity; Not to raise taxes, the largest in the fiscal budget, and not to raise them again after the autumn budget; and to have only one fiscal event a year, and if higher interest rates remove the so-called ‘headroom’, then something will have to give,” Zalan Coe added.
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