Inflation drops in UK slightly to 10.5 percent as petrol prices fall
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Economists said the “peak has now passed” after official figures showed the rate fell to 10.5 percent in December – the second month in a row it has dropped. It means prices are still rising, but at a slower rate than last month.
The slowdown is good news for stretched households with the cost of fuel now dropping as well as the cost of clothes.
Inflation was 10.7 percent in November, down from its eye-watering peak of 11.1 percent in October, with the downward trend forecast to speed up through this year.
Bank of England governor Andrew Bailey said he expects it to drop “rapidly” as energy prices fall in 2023.
Prime Minister Rishi Sunak has made it one of his five priorities to halve inflation by the end of the year, while some analysts say it could plunge to around three percent in 12 months’ time.
Falling inflation has also raised hopes of tax cuts later this year and that it could help bring an end to the crippling public sector strikes.
The Treasury is understood to have all but ruled this out in the March Budget, with Chancellor Jeremy Hunt adamant the “evil” of inflation must be tackled first.
But Tory MPs are pushing him hard to ease the burden on hard-pressed families by the Autumn.
Solid gross domestic product (GDP) data, which would see the UK potentially avoiding a technical recession in the last quarter of 2022, also buoyed recovery forecasts.
But despite the overall fall food costs continue to rise, with prices also going up in shops, cafes and restaurants, said the Office for National Statistics.
Mr Hunt said: “High inflation is a nightmare for family budgets, destroys business investment and leads to strike action, so however tough, we need to stick to our plan to bring it down.
“While any fall is welcome, we have a plan to halve inflation this year, reduce debt and grow the economy – but it is vital we take the difficult decisions.”
Alpesh Paleja, the CBI’s lead economist, said: “These figures add to a growing body of evidence that the UK has passed peak inflation.”
But Labour hit out at the Government’s economic policies and said inflation was still five times the two per cent target. While the British Chambers of Commerce said rising prices were still “far and away the top issue” affecting businesses.
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