UK Inflation Remains Stubbornly High

UK Inflation Remains Stubbornly High

Wednesday 18th January 2023 – 07:25 (GMT)

Inflation in the United Kingdom eased slightly to 10.5% in the 12 months to December, according to figures released by the Office for National Statistics (ONS), just below forecasts of 10.6%, but still close to record highs and stubbornly over 10%.

Rising food and drink prices were the main driver, with prices rising by 16.9% between November and December alone. On the other hand, easing fuel prices, along with clothing, footwear, recreation and culture, provided downward pressure.

Core inflation, which excludes volatile items such as energy, food, alcohol and tobacco, remained stable at 6.3% in December, slightly below market forecasts of 6.6%, but still well above pre-pandemic levels.

These latest readings leave inflation now sitting five times higher than the Bank of England’s 2% target, which has increased the likelihood of further interest rate hikes throughout 2023. This immediately pushed GBP demand higher ahead of the central bank’s next meeting on February 2nd.

Additionally, data released by the ONS yesterday showed that UK wages grew at the fastest rate in more than 20 years between September and November 2022. Average pay, including and excluding bonuses, rose by 6.4%, the highest growth since 2001, but a 2.6% fall in real terms when adjusted for rising prices.