UK inflation rises again

Should those anticipating a Bank of England rate cut be concerned?

UK inflation rises again

The annual inflation rate in the UK rose to 4% in December, up from the previous month’s 3.9%.

Consumer price inflation (CPI) data published by the Office for National Statistics (ONS) on Wednesday also showed a rise in core CPI – which excludes energy, food, alcohol and tobacco – to 5.1% in the 12 months to December 2023.

“The rate of inflation ticked up a little in December, with rises in tobacco prices due to recently introduced duty increases,” Grant Fitzner, chief economist at the Office for National Statistics, commented on the latest inflation figures. “These were partially offset by falling food inflation, where prices still rose but at a much lower rate than this time last year.

“Meanwhile, 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.”

According to Ben Thompson, deputy chief executive at mortgage intermediary brand and specialist network Mortgage Advice Bureau, the slight tick upwards in inflation would not be a massive shock to the system, as inflation was always unlikely to fall in a straight line this year.

He, however, pointed out that the concern now is if inflation does not start to come down again soon, the first base rate cut from the Bank of England may come a little later than anticipated.

“Swap rates have been unsettled in recent weeks and have led to a host of rate changes from lenders as the cost of funding drops,” Thompson said. “This has been welcome news for those looking to remortgage or get on to the housing ladder, and we hope that today’s slight increase won’t be the start of an upward trend.”

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