UK inflation unexpectedly rises to 4% in December

Inflation in the UK has risen for the first time in 10 months to 4% in December, the Office for National Statistics (ONS) has revealed.

In the latest data released by the ONS, consumer prices index (CPI) inflation increased by 0.1% between November and December, mainly as a result of price increases in alcohol and tobacco.

Tobacco prices jumped by 4.1% month-on-month, with an annual increased of 16%. Alcohol prices also increased by 9.6% year-on-year, whilst seeing a 1.6% price rise between November and December.

Core inflation, which excludes items including energy, food, alcohol and tobacco, was unexpectedly unchanged at 5.1%, while services inflation increased slightly from 6.1% to 6.2%.

Head of personal finance at Hargreaves Lansdown (HL), Sarah Coles, said: "This bounce in inflation isn’t a massive movement, and isn’t dramatically different to the forecasts, but it’s a surprise, and the markets really don’t like surprises. It’s a salient reminder that inflation is likely to trend downwards from here, but not particularly fast, and with plenty of bumps along the way.

"It’s horrible news for those who have been struggling for so long now."

Prices in transport increased by 0.6% between November and December, despite a -1.3% fall in the year to December.

Motor fuel prices also saw a decline of -10.8% year-on-year.

Inflation figures for January, which will be published next month, will take into account the 5% rise in the Ofgem energy price cap, with potential to drive up the headline inflation rate.

However, The Guardian has reported that economists expect the limit on utility bills will fall by 10% in April as a result of a wider decline in wholesale, which is expected to bring down the headline rate.

Personal finance analyst at Bestinvest, Alice Haine, added: "While a slight rise in inflation will come as a worry for households, it’s still a very different landscape to the start of 2023 when inflation hit an eye-watering 10.1% - a time when many Britons wondered how they would meet rapidly rising living costs.

"The rapid slowdown in the pace of price rises over the past 12 months means many Britons across the country will feel slightly more comfortable about the future than they did in January 2023. Plus, with average wage growth now outstripping inflation, consumers can tentatively look forward to better times ahead."



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