UK Inflation Eases In December

Peaking Pound?       Monday's move to $1.38 may be the best we see for sterling in a while              Source Bloomberg

Following a six-year high of 3.1 per cent in November, the Office for National Statistics (ONS) has revealed that inflation dropped to three per cent last month.

The consumer price index eased to 3% last month from a five-year high of 3.1% in November, raising the prospect that inflation may have peaked, easing some of the pressure on United Kingdom consumers.

Economists hope the fall in inflation will continue, with prices now rising more quickly than wages. The central bank's inflation report has pointed towards inflation peaking in 2017, for it to start easing back in 2018, which is precisely what we are seeing.

CPI hit 3.1 per cent in November, prompting Bank of England governor Mark Carney to write to the Treasury, explaining the rise.

Economists and the Bank of England forecast a slowdown this year, with the latter predicting a 2.4% level at the end of 2018.

"The continued weakness of underlying price pressures means that the MPC has little need to rush the next rate hike", said Samuel Tombs at Pantheon Macroeconomics.

He said: "Admittedly, the rise in Brent oil prices to a three-year high of 70 U.S. dollars a barrel in mid-January increases the risk that inflation could be sticky in the near term".

December CPI inflation over 5.2%, dashing hopes of RBI rate cut

Seaton also encouraged consumers to use platforms to keep an eye on spending, to help secure better mortgage and credit card rates.

The fall in wholesale inflation came on the back of falling which decreased from 4.10 per cent in November to 2.91 per cent this month.

On a month-on-month basis, the headline index increased by 0.59 percent in December 2017, 0.19 percent points higher from the rate of 0.78 percent recorded in November.

Brettell argues that if we strip out the Brexit noise, the UK's underlying economic situation doesn't look materially different from the rest of the developed world.

"Big themes like an ageing demographic and the rise of disruptive technologies are exerting downward pressure on prices", he said.

The CPI, which measured inflation, ended the 2017 with a rate of 15.37 per cent (year-on-year) in December 2017.

Maike Currie, investment director for personal investing at Fidelity International, said: "While price pressures may have eased slightly, this will be cold comfort to cash-strapped consumers who are still suffering a pay cut in real terms as inflation continues to outpace wage growth (including bonuses) at around 2.5%".

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