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LONDON — UK inflation eased during the month, in line with economists’ expectations, as fuel, clothing and leisure costs drove the index lower.
Inflation eased to 10.5% in December from 10.7% in November, Britain’s Office for National Statistics said on Wednesday. A panel of economists polled by Reuters had forecast Britain’s consumer price index to hit 10.5% in December, down from a 41-year high of 11.1% hit in October.
The core CPI, which excludes food, energy, alcohol and tobacco, was flat for the month at 6.3% in December, the ONS found.
The agency said the largest downward contribution came from the transport, clothing and leisure sectors, offsetting increases in housing and household services, food and non-alcoholic beverages.
Inflation rates have soared in 2022, fueled by soaring energy prices as Western sanctions hamper access to Russian oil and gas supplies. Policymakers have fought rising inflation with a wave of interest rate hikes, with British Prime Minister Rishi Sunak pledging on January 4 to halving headline inflation in the UK to “ease the cost of living and give people financial security”.
The Bank of England recently raised its main interest rate by 0.5 percentage points to 3.5% on December 15. Financial markets are anticipating a further rise to 4% when it meets to determine its next monetary policy steps on Feb. 2, according to Reuters. .
The UK has been rocked by waves of industrial action since late last year, with teachers, rail transport workers, civil service professionals and nurses due to strike this month and early february. The government responded with a anti-strike bill intended to impose “minimum service regulations”.
Workers’ compensation remains overshadowed by the pace of inflation, with the average UK wage recording a 6.4% year-on-year increase in the period September to November 2022, the ONS said on January 17.
“Although there are indications that inflation may have peaked, prices will remain high in the months ahead,” warned Helen Dickinson, chief executive of the British Retail Consortium.
“Retailers are committed to supporting their customers through this cost of living crisis. They are keeping the price of many essential products affordable, expanding their value ranges, increasing the salaries of their own staff and offering handed over to vulnerable groups.”