UK inflation unexpectedly rose to 4.0% in December, complicating expectations that the Bank of England would start cutting interest rates.
The Office for National Statistics said the annual inflation rate, as measured by the Consumer Price Index (CPI), rose from 3.9% in November, halting the recent sharp decline. Economists in the city had predicted a slight decline to 3.8%.
Nevertheless, the development allows Rishi Sunak, who promised a year ago to halve tax rates in 2023, when they were above 10%, to declare victory on his top economic priorities. It will be possible. Most economists had expected inflation to fall by this much anyway, but it turns out inflation has been more persistent than originally expected.
Lower inflation doesn't mean prices are falling, it just means that prices are rising more slowly.
Financial markets expect the Bank of England to cut interest rates this year as inflation falls and economic growth slows, pushing borrowing costs to their highest level since the 2008 financial crisis.
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