Inflation has crept back up. Figures released by the Office for National Statistics (ONS) show that the Consumer Prices Index (CPI) rose by 3.4 per cent in December. That’s up slightly from the 3.2 per cent rise in prices recorded in November – though it is roughly in line with what markets had expected.
The main drivers of the CPI rise – the first increase of the rate in six months – were Christmas plane tickets and the government's hike in tobacco duty. Nevertheless, it’s a move in the wrong direction and worrying news for a government whose sole aim, we’re told, is tackling the cost of living.
Responding to the figures Rachel Reeves said: ‘There’s more to do, but this is the year that Britain turns a corner.’ For that to be the case she needs inflation to begin falling again pretty quickly. Which in fairness the Bank of England, and most forecasters, think it will.
Still, despite those forecasts, core inflation remained at 3.2 per cent for another month and service inflation rose to 4.5 per cent. Both those numbers need to come down before Reeves can say Britain has turned a corner
Taken together with the faster than expected growth recorded in November these figures probably confirm that the Bank’s rate-setting committee will take their time before considering another cut to interest rates. Markets now don’t expect to see another one before April.
So, the government are still some way from being able to claim victory over the latest cost of living crisis. Forecasts suggest prices will start coming down more sharply from here on out though and Reeves, along with all of us, will be hoping they’re right.
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