While major countries such as the U.S. and Europe are expected to delay the timing of interest rate cuts due to lingering inflation risks, the UK Consumer Price Index (CPI) rose 4.0% year-on-year in December. This is higher than the previous month’s 3.9 percent and the Wall Street Journal’s 3.8 percent expert forecast.
The UK National Statistical Office said on the 17th (local time) that the CPI rebounded to 4.0% year-on-year last month, contrary to expectations. The increase in cigarette taxes applied at the end of November last year is considered a major factor in the inflation. Excluding highly volatile items such as food and energy, the core inflation rate was 5.1% per year, the same as the previous month, but this was also higher than the expert estimate of 4.9% per year.
As inflation has slowed faster than expected, it has been predicted that it will return to the Bank of England’s target of 2% per year by May at the latest. However, the high inflation rate cooled expectations that the central bank would cut interest rates in May and the value of the pound rose. While Christopher Waller, director of the U.S. Federal Reserve (Fed), said the rate cut should be carried out with caution the day before, the European Central Bank (ECB) officials’ hawkish remarks continued, dampening expectations for a rate cut.
Regarding the rise in CPI last month, British Finance Minister Jeremy Hunt said, “As we have seen in the cases of the United States, France and Germany, inflation does not fall in a straight line,” adding, “Our plan to slow inflation is working well and will maintain it.” ECB President Christine Lagarde said, “We have not won yet, but we are on the right path toward the 2% target,” but stressed, “An overly optimistic market is not helpful in the fight against inflation.”
