UK inflation unexpectedly rises to 4% in December

investmentweek.co.uk:

Prior to this morning’s data release, some economists had brought forward predictions for Bank of England rate cuts, expecting potential easing in May or June.

According to the Office for National Statistics, the uptick was in large part due to an increase in tobacco and alcohol prices, rising 12.9% in the year to December, while food and non-alcoholic beverage prices decreased.

Core inflation, which excludes food, alcohol, tobacco and energy, rose 5.1% in December, unchanged from the previous month. 

Economists had expected headline inflation to decelerate to 3.8% in December, and the core CPI reading to slow to 4.9%. 

Global investors temper bond yield expectations amid record rate cuts optimism

The UK has joined the US and the Eurozone with a disappointing uptick in headline inflation, following two months of sharp falls.

Despite the inflation rise, Richard Carter, head of fixed interest research at Quilter Cheviot, said the Bank of England will continue to face increasing pressure to begin cutting rates following weak GDP figures and signs of a slowing labour market. 

«Significant global headwinds also remain, not least the events in the Red Sea which could have a considerable impact on consumer prices in the coming weeks,» he said.  

«So, whether the Bank buckles under the pressure and begins cutting rates sooner than it might have originally liked remains to be seen.»

Neil Birrell, CIO at Premier Miton Investors, said that while December's annual rate is still well below the Bank of England's forecasts in November, the figure will «nonetheless knock back expectations of an early interest rate cut».

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«The picture is still not clear overall, as this