Jan 15, 2025
UK inflation unexpectedly drops in December, easing pressure in bond markets
Inflation in the U.K. unexpectedly fell in December, a move that has bolstered expectations that the Bank of England will cut interest rates again next month and relieved some pressure on the U.K. government following the recent turbulence in financial markets. The Office for National Statistics said Wednesday that inflation, as measured by the consumer prices index, was 2.5% in the year to December, largely as a result of easing price pressures in the services sector, which accounts for around 80% of the U.K. economy. In the wake of the inflation numbers, markets have moved to price in a growing likelihood of a cut then, to the likely relief of Treasury chief Rachel Reeves, who has faced a stream of negative headlines in recent days over her handling of the economy since Labour returned to power last July for the first time in 14 years.