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Reeves is currently in Parliament, where she is being challenged on the gilt market crisis and her decision to continue with a trip to China last week. Read the latest analysis on our gilt market blog.
Consumer Prices Index
To (mis)quote Shakespeare, the course of disinflation never did run smooth.
(Image credit: data sourced from Office for National Statistics)
Inflation has fallen considerably from its peak – what’s next?
The rate of UK inflation has slowed considerably from its peak of 11.1%, reached in October 2022. However, new pressures now loom large on the horizon.
For example, employer National Insurance contributions will rise in April after changes announced in the Autumn Budget. The National Living Wage will also rise by 6.7%. Many businesses are planning to pass these higher staffing costs on to customers by putting their prices up.
Wide-ranging tariffs could also be imposed by incoming president Donald Trump if he follows through on his threats. This could disrupt supply chains, creating further costs for businesses.
Inflation forecast
Economists at Deutsche Bank expect inflation to come in at 2.68% in December, which would be rounded up to 2.7% by the Office for National Statistics (ONS).
Experts at Hargreaves Lansdown also expect the headline figure to inch up.
“Prices at the pumps ticked higher over the month, while food price inflation jumped to 3.7% in December, the highest level since March,” says Susannah Streeter, head of money and markets at the investment platform.
Not all experts agree though. Morningstar has indicated the figure is more likely to remain flat at 2.6%, based on FactSet consensus estimates.
Good afternoon, and welcome to MoneyWeek’s inflation live blog. This is Katie Williams and Dan McEvoy, reporting live ahead of tomorrow’s report.
It has been a whirlwind start to the new year for the UK economy. Just two weeks into January, higher inflation expectations have caused government bond yields to surge, prompting a crisis in the gilt market.
Some are even calling for chancellor Rachel Reeves to step down – although opinions diverge on whether the Autumn Budget or political developments in the US are more to blame.
Will there be better news tomorrow?
Reeves returned from a trip to China yesterday and is expected to address Parliament after 12.30pm today
(Image credit: Photo by Aaron Favila – Pool/Getty Images)
