"December's data shows headline inflation jumping to 3.4%, reversing the encouraging steps forward in the UK's economic adjustment. This brings inflation further away from the Bank of England's 2% target and reminds us that the period of intense price pressure may not be fully behind us. Households continue to see little relief from the cost‑of‑living pressures, and this increase further undermines the consumer confidence required to sustain spending and economic demand."
"Higher inflation brings worrying news for government finances. Faster price growth raises pressure on inflation-linked expenditures, and a more unstable inflation environment inhibits policymakers' ability to plan and manage the public finances over the medium term. An upwards inflation trajectory will also unsettle the international markets, provoking fear of increases in debt interest costs. The Bank of England will be astutely aware of the challenge ahead and may hold a more restrictive monetary policy stance for longer than anticipated."
Headline inflation rose to 3.4% in December, reversing earlier improvements and pushing inflation further above the Bank of England's 2% target. Households face ongoing cost-of-living pressures that weaken consumer confidence and reduce spending. Faster price growth increases pressure on inflation-linked government expenditures, complicates medium-term public finance planning, and risks higher debt interest costs as international markets react. The Bank of England may maintain a more restrictive monetary stance for longer, while external factors such as renewed global tariff pressures could reignite domestic inflation through higher import costs. Interest rate cuts remain possible if inflation falls further, supporting growth and business investment.
Read at London Business News | Londonlovesbusiness.com
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