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LONDON — British inflation eased during the month, in line with economists’ expectations, as the cost of fuel, clothing and recreation dragged the index lower.
Inflation fell to 10.5% in December, compared with 10.7% in November, Britain’s Office for National Statistics said on Wednesday. A panel of economists polled by Portal had forecast Britain’s consumer price index to hit 10.5% in December, down from October’s 41-year high of 11.1%.
The core CPI, which excludes food, energy, alcohol and tobacco, held steady at 6.3% in December, the ONS noted.
The agency said the biggest downward contributors came from the transportation, clothing and recreation sectors, offsetting increases in housing and household services, food and soft drinks.
Inflation rates have soared throughout 2022, fueled by soaring energy prices as Western sanctions hamper access to Russian oil and gas supplies. Policymakers are combating rising inflation with a spate of rate hikes, with British Prime Minister Rishi Sunak pledging on January 4 to halve headline inflation in the UK to “lower the cost of living and give people financial security”.
Most recently, the Bank of England raised its key interest rate by 0.5 percentage points to 3.5% on December 15th. According to Portal, financial markets expect a further increase to 4% when they decide on the next monetary policy steps on February 2nd.
The UK has been rocked by industrial action since late last year, with teachers, train crew, civil servants and nurses set to strike this month and early February. The government has responded with proposed anti-strike legislation aimed at imposing “minimum service regulations”.
Workers’ wages remain dwarfed by the pace of inflation, with average UK wages posting a 6.4% year-on-year increase in the September-November 2022 period, the ONS said on January 17 .
“Although there are some signs 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 during this cost of living crisis. They keep prices affordable on many essentials, widen their price range, raise salaries for their own employees, and offer discounts to vulnerable groups.”