Bank of England Deputy Governor Sarah Breeden said that the need for further tightening of monetary policy has decreased, and the question of how long the current restrictive policy will need to be maintained has come to the fore. Breeden added that she is now less concerned about the ongoing inflationary pressures.
According to official data, in December consumer prices rose by 4.0% per year after increasing by 3.9% per year in November. It is the first increase in inflation rate in ten months. Economists had expected inflation to slow to 3.8% per annum. Meanwhile, core CPI - which excludes energy, food, alcohol and tobacco - rose by 5.1% per annum (the lowest rate since January 2022) after a similar increase in November. Consensus estimates suggested an increase by 4.9% per annum. On a monthly basis, core consumer prices edged up 0.6%, compared with the 0.3% decrease in November and the market estimate of a 0.4% increase. The data also showed that on a monthly basis, the consumer price index rose by 0.4%, offsetting the November drop (-0.2%). Economists expected an increase of 0.2%.
"The data on service price inflation and wage growth indicate slightly less inflation persistence than we assumed in the November forecast, and therefore my concerns about the risk of even greater persistence have decreased," Breeden said, adding that she will continue to monitor how wage and demand growth affect firms' pricing decisions in order to assess progress in bringing inflation back to the Central Bank's target level (2%).