By FocusEconomics
LONDON, England – Inflation came in at 4.0 percent in December, which was up from November’s 3.9 percent. The reading overshot market expectations of 3.8 percent and was double the Bank of England’s 2.0 percent target. The bounce-back in price pressures was primarily driven by a faster rise in prices for recreation and culture and a softer drop in price pressures for transportation.
Annual average inflation fell to 7.3 percent in December (November: 7.9%). Meanwhile, core inflation was unchanged, coming in at November’s 5.1 percent in December.
Lastly, consumer prices increased 0.42 percent in December over the previous month, swinging from the 0.24 percent drop seen in November.
Nomura analysts put the December reading into perspective:
“The December inflation prints are generally lower than what the Bank of England was expecting at the time of its November Monetary Policy Report, the result of previous undershoots. Indeed, back in November the BoE was expecting headline and service CPI inflation to be 4.6 percent and 6.9 percent for December – the outturns ended up being 0.6pp and 0.5pp lower than that.”
