London: UK inflation dipped for a second month in December, boosting hopes that the worst cost-of-living in a generation may be starting to ease.
Consumer prices rose 10.5 per cent from a year earlier, the Office for National Statistics said Wednesday. That’s slower than the 10.7 per cent gain in November and a peak above 11 per cent in October, when domestic energy bills surged.
Inflation nonetheless remains five times higher than the 2 per cent target, underlining the scale of the challenge facing the Bank of England as it tries to tame prices without worsening an expected recession.
The cost of motor fuels fell along with the price of clothing and shoes.
The central bank has raised interest rates nine times in a row since December 2021 and is expected to deliver a further half-point to 4 per cent next month. Investors anticipate rates to peak at around 4.5 per cent by mid-year.
Officials are trying to avert a wage-price spiral where workers bid up salaries because they expect high inflation to persist, prompting firms to raise prices further. While inflation is slowing, it remains close to four-decade highs and is unlikely to return to target until well into 2024 or beyond.
And prices are still rising faster than wages, particularly in the public sector where hundreds of thousands of workers from nurses to civil servants have gone on strike in recent weeks to demand bigger pay increases.