UK inflation unexpectedly slowed to 2.5 per cent in December, easing pressure on chancellor Rachel Reeves and clearing the path for the Bank of England to press ahead with cutting interest rates next month.
The consumer price inflation figure, which was below November’s 2.6 per cent reading and pulled lower by restaurant and hotel prices, triggered the biggest one-day rally in gilts in more than a year. Analysts had expected inflation to hold steady last month.
Wednesday’s data will provide some relief for Reeves, who is contending with higher borrowing costs fuelled by fears the UK economy could be entering a period of stagflation, in which sluggish growth is accompanied by persistent price pressures.
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