UK inflation accelerated in December for the first time since February last year, official data showed Wednesday.
Consumer prices rose 4% last month compared with a year ago, up from a rate of 3.9% in November, the Office for National Statistics said. Economists polled by Reuters had forecast a slowdown to 3.8%
Rises in tobacco prices due to recent duty increases were partially offset by falling food inflation, “where prices still rose but at a much lower rate than this time last year,” ONS chief economist Grant Fitzner said in a statement.
“The prices of goods leaving factories are little changed over the last few months, while the costs of raw materials remain lower than a year ago,” he added.
Core inflation, which strips out volatile food and energy prices, remained stuck at 5.1%, while services inflation increased from 6.3% to 6.4%.
The UK data mirrors the trend in the United States and Europe of slight upticks in headline inflation. The increases have led many economists to argue that the US Federal Reserve and the European Central Bank, which target a headline inflation rate of 2%, are unlikely to cut interest rates as soon as markets anticipate.
Other economists counter that inflation is still losing momentum overall.
Risks to that outlook include recent attacks on commercial vessels in the Red Sea, which are disrupting supply chains and could drive up the prices of manufactured goods. Energy prices could also rise if the conflict in the Middle East escalates further.
Still, several leading UK economists shrugged off the latest increase in inflation, noting that inflation could return to the Bank of England’s 2% target by the spring, helped by recent falls in energy prices.
“Inflation in the economy is still broadly moving in the right direction,” said Roger Barker, director of policy at the Institute of Directors.
Yael Selfin, chief economist at KPMG, added: “The expected overall improvement in the outlook for inflation, coupled with the slowdown in the domestic economy, will likely put the Bank of England in a position to begin cutting interest rates from the second half of the year, potentially lowering rates by (1 percentage point) in 2024.”
