January 19th, 2024
In a surprising turn of events, the UK inflation rate has rebounded to 4% in December, according to the latest Consumer Prices Index (CPI) released by the Office of National Statistics (ONS). This marks a slight increase from the 3.9% reported in November, dashing earlier expectations of a downward trend.
In our last blog post, we reported on early forecasts for 2024, predicting a 2% inflation rate in April. This shift in the economic landscape throws a spanner in the works for those plans, indicating a possible different outcome for the new year.
Quickly recapping recent inflation rate movements, the Consumer Prices Index (CPI) recently experienced a decline, dropping to 3.9% in November 2023. Forecasts for 2024 indicate an anticipated further reduction, with expectations of falling below 2% in the upcoming four months.
This comes as a surprise to many, expected the decreasing trend to continue and inflation drop to 3.8%. This drop sparked discussions within the Bank of England, raising the possibility of an interest rate cut happening sooner than initially expected.
Why Did Inflation Rise Again?
The greatest contributor was increased alcohol and tobacco costs, likely a result of the increased smoking duties in the Autumn statement. Chancellor Jeremy Hunt commented on today’s figures, saying “As we have seen in the US, France and Germany, inflation does not fall in a straight line, but out plan is working and we should stick to it.”
Looking Toward the Base Rate Update
The Bank of England, tasked with maintaining long-term UK inflation at 2%, left interest rates on hold at a 15-year high of 5.25% before Christmas. The recent inflation uptick raises doubts about the likelihood of a reduction in interest rates, with the next Bank Rate announcement scheduled for February 1st. Keep an eye on our News page for reactions and insights to the figure that comes out from BofE.
With today’s inflation figure now standing at double the Bank’s target, the pressure on households is increasing. Core CPI, which has been slow to fall, might prompt the Bank of England to resist making rate cuts until it returns to a more acceptable level.
To summarise, the unexpected rise in the UK inflation rate emphasises the ongoing challenges in managing inflation, prompting a cautious outlook for the future. Whilst it’s not a drastic rise, it reminds us that the battle is not yet over against rising inflation.
As we navigate these economic uncertainties, it remains crucial for individuals to stay informed and explore the best financial strategies, especially when it comes to mortgage decisions. No matter the market conditions, CMME brokers are on hand to help you navigate this period of uncertainty when it comes to getting the mortgage you deserve.
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