United Kingdom: Inflation comes in above market expectations in December
Inflation came in at 4.0% in December, which was up from November’s 3.9%. The reading overshot market expectations of 3.8% and was double the Bank of England’s 2.0% target. The bounce-back in price pressures was primarily driven by a faster rise in prices for recreation and culture and a softer drop in price pressures for transportation.
Annual average inflation fell to 7.3% in December (November: 7.9%). Meanwhile, core inflation was unchanged, coming in at November’s 5.1% in December.
Lastly, consumer prices increased 0.42% in December over the previous month, swinging from the 0.24% drop seen in November.
Nomura analysts put the December reading into perspective:
“The December inflation prints are generally lower than what the Bank of England was expecting at the time of its November Monetary Policy Report, the result of previous undershoots. Indeed, back in November the BoE was expecting headline and service CPI inflation to be 4.6% and 6.9% for December – the outturns ended up being 0.6pp and 0.5pp lower than that.”