Britain’s consumer price inflation fell to a three-month low of 10.5% last December, providing some relief to the Bank of England and British households, but food and drink prices continued to rise at their fastest pace since 1977.
The decline in the main rate of inflation – compared to 10.7% recorded last November – was in line with the expectations of economists polled by Reuters, moving away from the highest level it reached in 41 years at 11.1% last October.
While the decline in gasoline and clothing prices affected the main rate of inflation, the prices of food and non-alcoholic beverages rose 16.8% compared to the previous year, which is the largest increase since September 1977.
“Food prices continue to rise, with prices also increasing in shops, cafes and restaurants,” said Grant Fitzner, ONS chief economist.
Core consumer price inflation – which excludes energy, food, alcohol and tobacco – remained steady at 6.3% in December.
Core consumer price inflation is viewed by economists as a better guide to underlying inflation trends.
Last November, the Bank of England predicted a decline in the main consumer price inflation rate to about 5% by the end of 2023 with the stability of energy prices, but policymakers warned of continued upward pressure on inflation due to the contraction of the labor market and other factors.
Financial markets expect the Bank of England to raise its key interest rate to 4%.
The pound sterling rose slightly against the US dollar after this data.
British Chancellor of the Exchequer Jeremy Hunt said after the data was released that high inflation “is a nightmare for household budgets,” hurting business investment and leading to strikes.
“We need to stick to our plan, no matter how harsh it is, to bring down the inflation rate,” he added.
Hunt objected to union demands for higher wages in the public sector as many workers went on strike, given wages were rising at a much slower pace than inflation and less than average wages in the private sector.
