U.K. Inflation Slows but Remains Stubbornly High

The rate of inflation in Britain slowed for a consecutive second month in December, but was still running in the double digits, maintaining a tight squeeze on household finances.

Consumer prices rose 10.5 percent in December from a year earlier, down from 10.7 percent the previous month, with rising food prices and prices at hotels and restaurants offsetting lower gasoline and clothing prices, the Office for National Statistics said on Wednesday. Food and nonalcoholic drink prices rose 16.8 percent in December from a year earlier, slightly faster than the previous month.

The overall declines come after inflation hit a 41-year high in October, at 11.1 percent.

The peak in inflation appears to have passed, similar to trends in the United States, where the overall rate of inflation has been falling for six months, and in the eurozone, where the rate dipped below double digits in December. But central bankers, tasked with returning inflation to their 2 percent targets, are far from declaring victory.

For much of last year in Britain, the biggest driver of inflation was higher energy prices that led to more expensive household electricity and gas bills. As wholesale natural gas prices have fallen, central bankers remain concerned about the extent to which the energy shock is still feeding into the economy and the impact of the tight labor market. They see the risk of inflation becoming embedded through companies raising prices to offset higher costs and businesses significantly raising wages to attract workers in short supply when the cost of living is high.

Article source: https://www.nytimes.com/2023/01/18/business/uk-inflation.html