“While this surprise decline provides some timely respite amid the financial markets turmoil, with the headline rate still decisively above the Bank of England’s 2% target and domestic and international inflation headwinds growing, any relief may be short lived.
“Despite December’s unexpected decline, the near-term outlook for UK inflation remains ominous with higher energy bills likely to push the headline rate above 3% over the coming months, aided by April’s expected rise on Ofgem’s energy price cap.
“Inflation could drift gradually lower in the second half of 2025, if the likely downward pressure on prices from slowing wage growth and a weakening labour market is not derailed by higher, more volatile global prices.
“While these figures make a February interest rate cut more likely, concerns over the current market turbulence and heightened global inflation risks mean the decision of whether to loosen policy next month is not quite nailed on yet.”
ENDS
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