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LONDON — UK inflation eased this month, in line with economists’ expectations, as fuel, clothing and leisure costs dragged down the index.
Inflation eased to 10.5 percent in December, down from 1[ads1]0.7 percent in November, Britain’s Office for National Statistics said on Wednesday. A panel of economists polled by Reuters had forecast the UK CPI would reach 10.5% in December, down from the 41-year high of 11.1% reached in October.
Core CPI, which excludes food, energy, alcohol and tobacco, was stable on the month at 6.3% in December, the ONS found.
The agency said the biggest downward contribution came from the transportation, apparel and recreation sectors, offsetting hikes in housing and household services, food and non-alcoholic beverages.
Inflation rates have risen through 2022, driven by increases in energy prices as Western sanctions bite into access to Russian oil and gas supplies. Politicians have tackled rising inflation with a wave of interest rate hikes, and British Prime Minister Rishi Sunak pledged on January 4 to halve UK headline inflation to “ease the cost of living and give people financial security”.
The Bank of England most recently raised its main interest rate by 0.5 percentage points to 3.5% on 15 December. Financial markets expect a further increase to 4% when it meets to decide its next monetary policy steps on February 2, according to Reuters.
Britain has been rocked by waves of industrial action since the end of last year, with teachers, rail transport staff, civil servants and nurses due to strike this month and in early February. The government has responded with an anti-strike bill that aims to mandate “minimum service regulations”.
Workers’ pay remains dwarfed by the rate of inflation, with average wages in the UK recording a 6.4% year-on-year rise in the September-November 2022 period, the ONS said on 17 January.
“While there are some indications that inflation may have peaked, prices will remain high in the coming months,” warned Helen Dickinson, chief executive of the British Retail Consortium.
“Retailers are determined to support their customers through this cost of living crisis. They are keeping the price of many essentials reasonable, expanding their value ranges, increasing wages for their own staff and offering discounts for vulnerable groups.”