Inflation drops slightly in December but remains above target
15 January 2025, 07:03 | Updated: 15 January 2025, 07:32
Inflation dropped slightly in the month of December but remained above the target set by the Bank of England.
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The Consumer Price Index (CPI) rose by 2.5% in the 12 months to December 2024, down from 2.6% a month earlier.
Many economists had expected inflation to stay at 2.6% in December.
The Bank of England's target for inflation is 2%, but the rate of price rises is still within normal bounds.
Inflation had previously risen for two months in a row, although these were small increases.
Core inflation - a measure which strips out food and energy costs, which are more volatile, fell to 3.2% from 3.5%, which is a bigger drop than expected.
Economists had expected core inflation to fall to 3.4%.
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The news comes with the government under pressure over the state of the public finances, with Chancellor Rachel Reeves in the spotlight.
Borrowing costs rose last week amid market concern about Labour's Budget and the possible impact of the imminent Trump presidency on the British economy.
Responding to the inflation figures, Ms Reeves said: “There is still work to be done to help families across the country with the cost of living. That’s why the Government has taken action to protect working people’s payslips from higher taxes, frozen fuel duty and boosted the national minimum wage.
“In our Plan for Change, we were clear that growth is our number one priority to put more money in the pockets of working people. I will fight every day to deliver that growth and improve living standards in every part of the UK.”
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Analysing the figures, Grant Fitzner, the chief economist of the Office for National Statistics, said: "Inflation eased very slightly as hotel prices dipped this month but rose a year ago. The cost of tobacco was another downward driver, as prices increased by less than this time last year.
"This was partly offset by the cost of fuel and also second-hand cars, which saw their first annual growth since July 2023."
Economists and financial institutions welcomed the inflation figures as "good news".
Paul Noble, CEO of Chetwood Bank, said: |Many will have approached today’s result with some apprehension, but 2025 can begin on a positive note despite the uncertainty.”
But he warned that "the economic environment is still nowhere near stable, with inflation yo-yoing back and forth from the 2% target. The uncertainty surrounding the budget has not dissipated, but these figures will help to calm nerves nationwide, at least in the short term."
