December inflation set to stay at 2.6% in ‘reprieve’ for UK economy
The rate of Consumer Prices Index (CPI) inflation is expected to have come in at 2.6% last month, unchanged from November.
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Your support makes all the difference.UK inflation is set to have stayed the same in December as economists anticipate a “temporary reprieve” before price rises pick up pace this year.
The rate of Consumer Prices Index (CPI) inflation is expected to have come in at 2.6% last month, unchanged from November, according to a consensus of analysts provided by Pantheon Macroeconomics.
The Office for National Statistics will publish the latest figures on Wednesday.
Price rises on airfares, hotels, alcohol and tobacco are set to have weakened, putting downward pressure on the overall rate of inflation.
On the other hand, analysts think energy prices continued to rise, while food inflation is likely to have increased in December.
Rob Wood and Elliott Jordan-Doak, economists for Pantheon Macroeconomics, said inflation staying at 2.6% would be “only a temporary reprieve” for the economy.
This is because they are expecting price pressures to build from 2025 with CPI inflation forecast to reach 3.2% in April.
Sanjay Raja, a senior economist for Deutsche Bank, agreed that weaker airfares and hotel prices will have helped put downward pressure on inflation in December, which it forecasts will come in at a slightly higher 2.7%.
“Looking ahead, price momentum will only pick up from here,” he said.
“Increases to the National Living Wage and employer national insurance contributions will, we expect, push inflation higher over 2025.
“Higher energy prices won’t help either, nor will higher food prices, which are starting to emerge.”
The latest inflation data from the Office for National Statistics will be released amid a period of turbulence in the UK financial markets, with the value of the pound dropping sharply and the cost of borrowing rising to decades-high levels.
Chancellor Rachel Reeves has come under pressure over her plans for the nation’s finances, with rising yields on government bonds seen as an indicator of weaker market confidence in the economy.
Kathleen Brooks, research director at XTB, said that a “nasty upside surprise” in Wednesday’s inflation data “could trigger another sell-off and more concrete action from the Government”.
“The economic situation remains perilous and there are only so many times that the Chancellor can promise to boost growth,” she said.