LONDON - British inflation fell to a lower-than-expected 2.5% in December, data from the Office for National Statistics showed on Wednesday.
The consumer price index (CPI) rose to 2.6% in November, and economists polled by Reuters expected the December figure to remain unchanged.
Core inflation, which excludes volatile food and energy prices, was 3.2% in the 12 months to December, down from 3.5% in November.
British inflation hit a more than three-year low of 1.7% in September, with monthly prices rising since then as rising fuel costs and service charges rose faster than commodity prices. Annual services inflation was 4.4% in December, down from 5% in November.
this GBP Shortly after the release, it was down 0.3% against the dollar at 07:15 am London time.
Commuters pass through a junction near the Bank of England (BOE) in the City of London, England, Wednesday, May 8, 2024 (left). Bank of England policymakers appear to be the most divided since the end of the hiking cycle last year, illustrating the challenge Premier Andrew Bailey faces in guiding his colleagues toward potential interest rate cuts in the coming weeks. Photographer: Hollie Adams/Bloomberg via Getty Images
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financial challenges
Plans to increase taxes announced by the government last autumn will come into effect in April, causing panic among British businesses who warned investment, hiring and growth would be hampered.
Britain's borrowing costs and currency have also weakened amid concerns over the country's economic outlook and fiscal plans, complicating Finance Minister Rachel Reeves' ambitions to balance the budget.
Reeves has vowed to abide by self-imposed fiscal rules to ensure all day-to-day spending is met by revenue and government debt is on a downward trend. She may now be forced to decide whether to adjust or break those limits.
She faces the choice of taking no action and hoping unfavorable borrowing conditions subside, raising taxes further - a move that is likely to draw more criticism from business and the public - or cutting public spending, a step the government has already proposed but This goes against Labour’s anti-‘austerity’ stance. Over the weekend, Reeves said the fiscal rules set out in the budget were "non-negotiable", adding that "economic stability is the cornerstone of economic growth and prosperity".
Ben Zaranko, deputy director of the Institute for Fiscal Studies, said Reeves faced "a pretty enviable set of choices."
"This unfortunate predicament is largely the result of financial inheritance difficulties and global economic factors," he said in comments.
“But it also reflects a series of government choices and mutually incompatible commitments: insisting on strict, digital fiscal rules while retaining only the best profits; prioritizing public services and avoiding another round of austerity; not Raise the biggest tax in the fiscal budget and not raise it again after the autumn budget; and hold only one fiscal event a year, and if higher interest rates remove the so-called "headroom", then something has to give," Zaranko added.