Inflation in the United Kingdom (UK) fell to 10.5% in December, according to data from the UK Office for National Statistics (ONS). The core consumer price index (CPI) was down from 10.7% in November and from the massive 11.1% inflation growth recorded in October, the highest in about 41 years.
The U.K. as well as other countries have seen similar inflation gains as the war between Russia and Ukraine has caused numerous financial, energy and supply crises that have nearly paralyzed most economies. Thanks to concerted efforts by the Bank of England (BoE) to reduce the rate of inflation growth, November’s figures were in line with the expectations of economists polled by Reuters.
According to data released by the ONS, the core CPI indicator, which excludes food, energy, alcohol and tobacco, was set at 6.5 percent, a figure considered stable for December. The ONS also reported that transportation, recreation and clothing were the main contributors to the reduction in inflation.
Sectors such as housing, food, and soft drinks remain of great concern as prices remain high. The concerted effort to combat inflation was seen as a major mantra for British Prime Minister Rishi Sunak, who pledged to cut inflation in half in a speech on January 4.
Rishi Sunak, who served as Chancellor of the Exchequer before becoming British Prime Minister, said he was concerned with reducing inflation to help “ease the cost of living and give people financial security.“
The process seems to be going well so far, as evidenced by the latest ONS CPI index. While there is still work to be done, the BoE’s interest rate hike seems to be working so far.
Inflation and interest rate hikes in the UK
Like its counterparts in other developed countries, the U.K. BoE has been raising interest rates to combat headline inflation. In December, the U.K. central bank raised interest rates by 0.5 percentage points to 3.5 percent, and experts believe it will raise them again at its next meeting.
The fact that inflation is coming down does not necessarily mean the battle is won. The interest rate is still very high and the Bank of England’s goal remains to reduce it to single digits. One of the great victories for British workers is that, according to the ONS, wages rose 6.4 percent year-on-year in the September-November period last year.
While these high wages have cushioned the impact of inflation over this period, Helen Dickinson, chief executive of the British Retail Consortium, warned that, despite the fall in inflation, prices will remain high in the short term, but she welcomed the concerted efforts to ease the pain across all sectors.
“Retailers are determined to support their customers through this cost of living crisis. They are keeping the price of many essentials affordable, expanding their value lines, increasing wages for their own staff, and offering discounts to vulnerable groups“, she said.