Will it prompt a February rate cut from the Bank of England?

The annual inflation rate in the UK rose by 2.5% in December 2024, down from 2.6% in the previous month but still above the Bank of England’s 2% target, data released by the Office for National Statistics (ONS) on Wednesday shows.
On a monthly basis, the Consumer Price Index (CPI) rose by 0.3% in December, down from 0.4% in the same month last year.
Core inflation, which excludes volatile items such as energy, food, alcohol, and tobacco, rose by 3.2% year-on-year in December, compared to 3.5% in November.
The ONS said the largest downward contribution to the monthly change in CPI annual rates came from restaurants and hotels, while the largest upward contribution came from transport.
“Inflation eased very slightly as hotel prices dipped this month but rose a year ago,” said Grant Fitzner, ONS chief economist. “The cost of tobacco was another downward driver, as prices increased by less than this time last year.
“This was partly offset by the cost of fuel and also second-hand cars, which saw their first annual growth since July 2023.”
Consumer Price Index (CPI) rose by 2.5% in the 12 months to December 2024, down from 2.6% in November 2024.
— Office for National Statistics (ONS) (@ONS) January 15, 2025
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“This is good news, and comes despite predictions of another small rise,” said Paresh Raja, chief executive of specialist lender Market Financial Solutions. “However, the fact that inflation is proving sticky, remaining above 2%, is still likely to fuel arguments that the Bank of England (BoE) will, or should, delay cutting the base rate.
“The key focus now shouldn’t be on whether the BoE cuts the base rate at its next meeting or even the one after that. This attitude actually creates hesitancy, encouraging a ‘wait and see’ approach. Instead, as an industry, we need to continue adapting to the current lending landscape and ensure that brokers and borrowers have the support they need to execute their plans effectively.
“We’ve already observed positive signs of growth in the early months of this year, particularly when it comes to house prices and buyer demand. So, if lenders can tailor their offerings to meet their clients’ needs, there’s every reason to remain optimistic about the outlook for the months ahead.”
For Ben Thompson, deputy chief executive at mortgage intermediary brand and specialist network Mortgage Advice Bureau, it’s been clear for a few months now that inflation would remain slightly above the Bank of England’s targets.
“Today’s reading reinforces the view that this trend may continue into the new year,” he said. “For buyers, this means that, at least in the short term, borrowing costs are likely to remain broadly where they are. As we move into the spring and summer months, inflation will hopefully slow, allowing the Bank of England to resume its rate-cutting cycle.
Thompson, however, agreed with Raja that “now is not the time for buyers to adopt a wait-and-see approach.”
“Seeking advice, getting mortgage ready by ensuring all of your paperwork is in order, and even securing a mortgage in principle can make all the difference when it comes to buying,” he stressed.
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