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LONDON — U.K. inflation unexpectedly nudged upwards to 4% year-on-year in December, fueled by a rise in alcohol and tobacco prices.
This was the first month in which the annual consumer price index has risen since February 2023.
Economists polled by Reuters had expected a modest decline in the annual headline CPI to 3.8%, after November’s sharper-than-expected fall to 3.9%.
Month-on-month, the headline CPI rose by 0.4%, above a consensus forecast of 0.2% and up from -0.2% in November.
“The largest upward contribution to the monthly change in both CPIH and CPI annual rates came from alcohol and tobacco while the largest downward contribution came from food and non-alcoholic beverages,” the Office for National Statistics said.
The closely watched core CPI figure — which excludes volatile food, energy, alcohol and tobacco prices — came in at an annual 5.1%, above a 4.9% Reuters forecast and unchanged from November.
The largest upward contribution to the core figure came from travel and transport services, the ONS said.
Inflation still on track for 2%
“As we have seen in the U.S., France and Germany, inflation does not fall in a straight line, but our plan is working and we should stick to it,” British Finance Minister Jeremy Hunt said in a statement.
“We took difficult decisions to control borrowing and are now turning a corner, so we need to stay the course we have set out, including boosting growth with more competitive tax levels.”
U.S. inflation also rose in December to an annual 3.4% from 3.1% in November, while euro zone CPI jumped to 2.9% from 2.4% in the previous month.
The Bank of England will hold its next monetary policy meeting on Feb. 1, after hiking interest rates rapidly over the past two years in a bid to tame runaway inflation.
“This unexpected rise in inflation is a timely reminder that the struggle against soaring inflation is not yet over, particularly given stubbornly high core and services inflation,” said Suren Thiru,…
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