UK inflation data leaves Starmer miles off goal of growth ‘felt in people’s pockets’
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Increase extinguishes expectations of interest rate cut this week and underlines tough challenges policymakers face. Keir Starmer’s latest “milestone” for the economy is growth that can be “felt in people’s pockets”. News that inflation hit 2.6% in November, and is heading in the wrong direction, underlined just how far there is to go.
The latest inflation data extinguished any lingering expectations of a rate cut this week – and there were some worrying signs in the detail for policymakers that could result in borrowing costs being on hold for some time to come. Transport was a key contributor to the increase in consumer price inflation – the Bank’s targeted measure – with the price of a litre of petrol up by 0.8p a litre to 134.8p.
But while they have little control over global energy prices, the Bank of England’s rate-setters are likely to be more concerned at the increase in core inflation. This measure, which excludes volatile food and fuel prices, continues to rise – up 3.5%, from 3.3% in October.
The Office for National Statistics highlighted recreation and culture as a factor here: including “cultural services” such as theatre and gig tickets, and “games, toys and hobbies”, including video games – suggesting consumers are continuing to pay eye-watering prices for a night out – or in.
The monetary policy committee will worry that this evidence that the strong wage growth evident in Tuesday’s labour market data, while great news for the UK’s workers, is helping to put a floor under prices. Services prices overall were 5% higher than a year ago, the same growth rate as in October.
