From “CNBC”:

U.K. inflation increased to 4% year-on-year in December, pushed by a rise in alcohol and tobacco prices. Economists had predicted a conservative fall, but the consumer price index rose above expectations, with the core CPI, excluding food, energy, alcohol, and tobacco, increasing to 5.1% annually. The Bank of England is set to discuss monetary policy on February 1 after rapidly raising interest rates in a bid to curb inflation.

British Finance Minister Jeremy Hunt stated the plan to control borrowing and boost growth with competitive tax levels, insisting that the country stays the course to target 2% inflation. The U.S. and Euro zone faced similar inflation hikes, with the Bank of England considering lowering projections in February and potentially cutting interest rates as early as May.

While inflation may rise in January due to the energy price cap increase, it is expected to drop with lower energy bills and reduced food inflation. Core inflation may remain sticky due to ongoing tensions in the Red Sea, but the rate should decelerate as slower wage growth and a stagnating economy tame demand, returning to the Bank of England’s 2% target.

Despite an over 100 basis point rate cut prediction for the year, the British central bank faces a challenging path, with a decline in posted vacancies and slower pay growth. Yet, real pay is still growing as inflation falls faster, presenting a complex issue for the Bank as they weigh the decision on rate cuts.



Read more: UK inflation rate surprises with rise to 4%, led by alcohol and tobacco