Inflation charge drops from 2.6 per cent to 2.5 – however consultants say costs will rise quicker later within the yr

The rate of Consumer Prices Index (CPI) annual inflation fell to 2.5 per cent in December from 2.6 per cent in November, the Office for National Statistics said today.

The largest downward contribution to the monthly change came from restaurants and hotels, while the largest upward contribution came from transport. 

Prior to today’s announcement, economists polled by Reuters had pointed to an unchanged reading of 2.6 per cent. 

On a monthly basis, CPI rose by 0.3 per cent in December 2024, down from 0.4 per cent in December 2023. 

ONS chief economist Grant Fitzner said: ‘Inflation eased very slightly as hotel prices dipped this month, but rose a year ago. The cost of tobacco was another downward driver, as prices increased by less than this time last year.

‘This was partly offset by the cost of fuel and also second-hand cars, which saw their first annual growth since July 2023.’

The rate of CPI inflation including owner occupiers’ housing costs – known as CPIH – stood at 3.5 per cent in the 12 months to December, unchanged from November. 

The Bank of England – which financial markets expect will cut interest rates by a quarter point to 4.5 per cent on February 6 – forecast in early November that CPI inflation would be 2.5 per cent in December.

Rob Wood and Elliott Jordan-Doak, economists for Pantheon Macroeconomics, said ahead of today’s announcement that they are expecting price pressures to build from 2025 with CPI inflation forecast to reach 3.2 per cent in April. 

More to follow