UK inflation falls to 2.5%

Inflation in the UK fell to 2.5% in December 2024, lower than expected, with core price increases also continuing to slow.

Inflation in the UK fell to 2.5% in December 2024, lower than expected, with core price increases also continuing to slow, according to figures just released by the UK Office for National Statistics.

The consumer price index (CPI) rose 2.6% in November, while economists surveyed by Reuters predicted the December figures would remain unchanged.

Core inflation, which excludes volatile food and energy prices, fell from 3.5% in November to 3.2% in December 2024.

Inflation in the UK briefly hit a three-year low of 1.7% in September 2024, but monthly prices have since risen again due to higher fuel costs and services fees outpacing goods prices. In December 2024, annual services inflation reached 4.4%, down from 5% in November.

Inflation in the UK fell to 2.5% in December 2024 - Illustration.

The British pound fell 0.3% against the US dollar at 7:15 a.m. London time today, immediately after the data was released.

This data will be a key factor for the Bank of England to consider ahead of its next meeting on February 6th, when the central bank is expected to cut its base interest rate from 4.75% to 4.5%, despite inflationary pressures such as wage growth and uncertainty about the UK's economic outlook. The central bank's inflation target is 2%.

Economic challenges

The UK economy has recently been in a difficult position, with economists expressing concerns about sluggish growth prospects and external headwinds, such as potential trade tariffs under US President-elect Donald Trump, as well as internal financial and economic challenges that have plagued the Labour government and the Treasury since the October budget.

Responding to the latest figures, UK Finance Minister Rachel Reeves recently stated: “ There is still much work to be done to support the cost of living for families across the country ,” and that economic growth remains a priority for the UK.

Financial challenges

The tax increases announced by the government last autumn, scheduled to take effect in April, have caused anxiety among British businesses, who have warned that investment, hiring, and growth will stagnate.

He also witnessed rising borrowing costs and a falling pound amid concerns about the economic outlook and national financial plans, posing a challenge to Finance Minister Rachel Reeves' ambitions to balance the budget.

Rachel Reeves has pledged to adhere to self-imposed fiscal rules to ensure all day-to-day spending is funded from declining government revenue and debt. However, she may face the prospect of adjusting or breaking these restrictions.

Her options include doing nothing and hoping that unfavorable borrowing conditions will ease, raising taxes – a move likely to draw further criticism from businesses and the public – or cutting public spending, a step already proposed by the government but which conflicts with the Labour Party's anti-austerity stance.

Last weekend, Rachel Reeves asserted that the fiscal rules in the budget are “ non-negotiable ,” and stressed that “ economic stability is the foundation for economic growth and prosperity .”

Ben Zaranko, Deputy Director of the Institute for Financial Studies, commented that British Finance Minister Rachel Reeves is facing “ a rather unpleasant set of choices ”.

" This unfortunate situation is largely a consequence of a troubled financial legacy and global economic factors ," he remarked.

“ But it also reflects a series of government choices and irreconcilable promises: Adhering to a rigid fiscal rule while leaving very little room for maneuver; prioritizing public services and avoiding another round of austerity; not raising large taxes and not raising taxes further after the fall budget; and holding only one fiscal event per year. If higher interest rates eliminate that so-called room for maneuver, something will have to change ,” said Ben Zaranko.

Inflation in the UK briefly hit a three-year low of 1.7% in September 2024, but monthly prices have since risen again due to higher fuel costs and services fees outpacing goods prices. In December 2024, annual services inflation reached 4.4%, down from 5% in November.

Source: https://congthuong.vn/lam-phat-anh-giam-xuong-25-369716.html