The aggregate number has decreased due in part to cheaper transportation expenses resulting from decreasing motor fuel prices.
According to official data, the rate of inflation decreased to 10.5% from 10.7% in November.
The Office for National Statistics (ONS) reported that the decrease in the core consumer prices index (CPI) was due to the decreased cost of motor fuels, as well as cheaper apparel and footwear, and recreation and culture.
The ONS stated that increasing pricing in restaurants and hotels, as well as food and non-alcoholic beverages, drove up inflation.
The announcement made today is the latest indication that the United Kingdom may have seen the worst of inflation. In October, the rate reached a 41-year high of 11.1%. Since then, it has decreased.
Reuters questioned economists who anticipated a rate of 10.5% for the year ending in December 2022.
Since late 2021, when supply chain issues resulting from COVID lockdowns and workforce shortages made it impossible to meet consumer demand, prices had risen steadily.
As a result of Russia’s invasion of Ukraine, countries hurried to find alternative energy supplies and lessen their reliance on Russian gas, driving up the price of energy and all other items requiring energy input.
The gradual decline in inflation is bad news for borrowers, as the Bank of England is likely to continue its program of interest rate hikes to achieve its inflation target of 2%.
This month, the Bank’s chief economist cautioned that inflation in the United Kingdom may be more persistent than in other countries.
While financial markets anticipate that rates will peak at 4.25 percent in May, Mr. Pill’s comments may indicate a willingness on the part of the Bank to hike rates further or for longer if inflation does not decline.
Chancellor Jeremy Hunt responded to the news today by saying: “We must stick to our goal to decrease inflation. No matter how challenging it may be. High inflation is a nightmare for family budgets, inhibits corporate investment, and causes strikes.
“We have the plan to go further and halve inflation this year, decrease debt, and build the economy. But we must make the necessary painful decisions and see the plan through.
To assist families in the interim, we will provide an average of £3,500 per home over the following year.
According to the Institute of Chartered Accountants in England and Wales (ICAEW). If the government’s inflation reduction goals are met, it will not be because of state policy.
“The prime minister should achieve his pledge to halve inflation this year,” the ICAEW economics director said. “But this will be due more to the downward pressure on prices from a flatlining economy and falling energy costs than to any government action.”
The Confederation of British Industry (CBI) noted that although inflation is decreasing, household pressures are substantial and will remain so.
“Despite this, the cost of living crisis will continue to be a very serious challenge for both individuals and businesses. Since short-term price pressures remain high,” said Alpesh Paleja, the CBI’s chief economist. Amid a recession, businesses will continue to face increasing expenses and lower demand.
