UK Inflation Drops to 2.5%, Lowest in Years.
UK inflation recorded at 2.5% In December, UK inflation was reported at 2.5%.
Economists had anticipated that the rate would remain steady at 2.6%. The Bank of England aims for a 2% target regarding price increases; however, the current figure is still considered to be within acceptable limits. Recent months have seen inflation rise again, driven by increasing energy costs and wages.
There are apprehensions that Rachel Reeves's budget announced in October may lead to further inflationary pressures, particularly with the implementation of a 6.7% increase in the minimum wage (and a 16% increase for individuals aged 18-20) set to take effect in April. The Bank of England has indicated that it is closely monitoring this situation, as any significant increase could hinder the pace of interest rate reductions this year from the current rate of 4.75%.
ONS reveals what was behind the drop
Office for National Statistics chief economist Grant Fitzner said: "Inflation eased very slightly as hotel prices dipped this month but rose a year ago. 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."
