United Kingdom: Inflation dips in December
January 16, 2019
Consumer prices rose 0.2% in December over the previous month, matching November’s figure. December’s reading was underpinned by higher prices for food and non-alcoholic beverages and transport.
Inflation fell from 2.3% in November to 2.1% in December, matching market expectations and marking the lowest reading in nearly two years, on the back of lower fuel prices. Inflation is now only just above the Bank of England’s (BoE) 2.0% target. Core inflation—which excludes food and energy costs—inched up from 1.8% to 1.9%.
Looking ahead, inflation is likely to stay close to the BoE’s target, supported by the recent fall in oil prices. However, higher wage pressures will provide upward pressure. The outcome of the Brexit process is a key risk to the inflation outlook, as a no-deal Brexit could lead to a sharp currency depreciation and hence fan price pressures, even in the face of weaker domestic demand.
Author: Oliver Reynolds, Economist