UK inflation rate falls for second month in a row to 10.5%

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LONDON — UK inflation eased this month, in line with economists’ expectations, as fuel, clothing and leisure costs dragged down the index.

Inflation eased to 10.5 percent in December from 10.7 percent in November, Britain’s Office for National Statistics said on Wednesday. A panel of economists polled by Reuters forecast Britain’s consumer price index to reach 10.5 percent in December, down from a 41-year peak of 11.1 percent reached in October.

Core CPI, which excludes food, energy, alcohol and tobacco, was steady on a monthly basis at 6.3% in December, the ONS found.

The agency said the biggest contributors to the decline came from the transportation, clothing and recreation sectors, offsetting increases in housing and household services, food and non-alcoholic beverages.

Inflation rates have soared throughout 2022, fueled by spikes in energy prices as Western sanctions bite into access to Russian oil and gas supplies. Policymakers are tackling rising inflation with a series of interest rate hikes, and British Prime Minister Rishi Sunak pledged on January 4 to halve UK inflation to “ease the cost of living and give people financial security”.

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The Bank of England recently raised its main interest rate by 0.5 percentage points to 3.5% on 15 December. Financial markets expect further growth to 4% when they meet to determine their next monetary policy steps on February 2, according to Reuters.

The UK has been rocked by waves of industrial action since late last year, with teachers, train transport staff, civil service professionals and nurses set to strike this month and into early February. The government responded with an anti-strike bill that aims to mandate “minimum service regulations.”

Workers’ wages remain below the pace of inflation, with average wages in the UK set to grow by 6.4% year-on-year between September and November 2022, the ONS said on 17 January.

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“While there are some indications that inflation may have peaked, prices will remain high in the coming months,” warned Helen Dickinson, chief executive of the British Retail Consortium.

“Retailers are determined to support their customers during this cost of living crisis.” They keep the prices of many essentials affordable, extend the value range, increase wages for their own staff and offer discounts for disadvantaged groups.”

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