On the go: The rate of inflation dropped slightly in December as the price of fuel and clothing eased. However, concerns are growing that wage rises are embedding inflation into the economy.
The consumer price index was 10.5 per cent in the 12 months to December, the Office for National Statistics announced on January 18, a drop when compared with the 10.7 per cent seen in November.
Restaurant and hotels, as well as food and non-alcoholic beverages, were the main factors pushing prices up in the month.
Fuel, clothing and footwear, and recreation and culture all saw lower prices.
ONS chief economist Grant Fitzner said: “Inflation eased slightly in December, although still at a very high level, with overall prices rising strongly during the past year as a whole.”
Inflation has now sat above the Bank of England’s 2 per cent target since May 2021.
Quilter Investors chief investment officer Marcus Brookes said that although energy and fuel prices are falling, services are now driving inflation as companies have had to increase wages “just to get staff on their books”.
“Combining those cost pressures with the effect that energy prices have had and you have a cocktail for sticky inflation that refuses to budge quickly,” he said.
“It is this that the Bank of England will be fretting about when it comes to how much to raise interest rates at their next meeting.”
Chancellor Jeremy Hunt noted that high inflation is a “nightmare” for family budgets, destroys business investment, and leads to strike action.
“However tough, we need to stick to our plan to bring it down,” he said.
“We have a plan to go further and halve inflation this year, reduce debt and grow the economy, but it is vital that we take the difficult decisions needed and see the plan through.”
This article first appeared on FTAdviser.com
