According to the report from the Office for National Statistics (ONS), consumer prices rose by 2.5% per year in December after an increase of 2.6% per year in November (the highest level since March). Economists had expected CPI growth of 2.6% per annum. However, it matched the BoE's forecast from early November. On a monthly basis, the consumer price index rose 0.3%, accelerating compared to November (+0.1%). Consensus estimates suggested an increase of 0.4%. Overall, recent data has increased the likelihood that the Bank of England may soon ease monetary policy.
The ONS said that the largest downward contribution to the CPI annual rates came from restaurants and hotels. Meanwhile, the largest upward contribution to both came from transport. Prices slowed for restaurants and hotels (3.4%, the lowest since July 2021 vs 4%), recreation and communication (3.4% vs 3.6%) and services (4.4%, the lowest since March 2022 vs 5). Prices decreased less for transport (-0.6% vs -0.9%) as upward effects from motor fuels and second-hand cars (1%) partially offset a downward effect from air fare (-26%).
Meanwhile, core CPI - which excludes energy, food, alcohol and tobacco - slowed to 3.2% per year (the lowest value since September) from 3.5% per year in November (the highest value since August). Consensus estimates suggested an increase by 3.4% per annum. The CPI all goods index rose by 0.7% in the year to December, up from 0.4% in the year to November. The CPI all services index rose by 4.4% in the year to December, down from 5.0% in November. This is the lowest rate since March 2022.
On a monthly basis, core consumer prices rose 0.3% after remaining unchanged in November. Economists had expected an increase of 0.5%.