UK December CPI +3.4% vs +3.3% y/y expected

• Prior +3.2%
• Core CPI +3.2% vs +3.3% y/y expected
• Prior +3.2%

Stubborn, stubborn inflation. Headline annual inflation nudged higher in December, driven partly by higher tobacco prices. That comes after the recently-introduced excise duty increases on that front. But adding to that, airfares also saw prices rising more than a year ago – which is largely due to the Christmas holiday period.

But overall, prices in general remain sticky and stubborn and that is even more evident in the core estimates.

Core annual inflation remains unchanged to end the year at 3.2%. The breakdown even shows a marginal increase in both goods inflation (up to 2.2% from 2.1% previously) and services inflation (up to 4.5% from 4.4% previously). The latter of course remains the most troubling spot and is something the BOE won’t be able to take much comfort in.

As things stand, it doesn’t look like were anywhere near the next rate cut. A softening labour market picture will add to potential stagflation risks this year but for now at least, the overall economic picture is still relatively resilient.

This article was written by Justin Low at investinglive.com.