Surprise fall in inflation after two months of rises

Business

There’s been a surprise fall in inflation to 2.5% after two months of rises, official figures show.

It means prices are still rising but at a slower pace than before, according to Office for National Statistics (ONS) data for December.

Economists had expected the figure to remain at 2.6%, the level recorded in November.

Inflation is still above the 2% target of interest rate setters at the Bank of England but exactly as they had forecast in November.

It may mean there is more chance of an interest rate cut when the Bank’s rate-setting Monetary Policy Committee meets in three weeks’ time.

Beyond the headline consumer price index (CPI) measure of inflation are more figures that will be welcome news for the Bank and for Chancellor Rachel Reeves.

Two metrics closely watched by the Bank fell more than expected. The persistently high services inflation fell from 5% a month before to 4.4%, far below the 4.9% forecast by economists.

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