14 December 2022
If you are covering the latest UK inflation statistics, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“UK inflation eased slightly in November, dipping to 10.7%. The latest data marks a fall of 0.4%, which is far more palatable than the huge 1% increase seen between September and October of this year. While the slight dip is a step in the right direction, the issue of rising food prices and growing household energy bills remains firmly in place. However, considering the US also saw better than expected inflation data yesterday, it is encouraging that we may finally be passing the peak of inflation.
“Temperatures have taken a sharp dive in the last week or so, and the demand for gas will no doubt have increased as people are forced to heat their homes. As the autumn had been rather mild, we will only now begin to see the real impact of higher energy bills. While the government support remains in place for now, any changes made once the April deadline is reached could have a knock-on effect on inflation.
“The Bank of England is set to make its next interest rate decision tomorrow, and a 0.5% hike to 3.5% is widely anticipated as inflation remains uncomfortably high and economists expect inflation to average around 7% in 2023.
“Given the latest UK labour market data showed an uptick in both unemployment and wage growth, the Bank faces a tricky dilemma in combatting inflation while also being mindful of a weakening economy. While inflation is falling, it remains well ahead of wages, and we are heading into a new winter of discontent with strikes concentrated in the unionised public sector and former nationalised industries as a result. A hike is still expected this time around, but as we move into next year the pace of Bank of England rate hikes is likely to slow.
“The Chancellor’s Autumn Statement in November helped to settle the waters following months of significant turbulence, but inflation remains far above the Bank’s 2% target which means there is still a long way to go yet. A rapid fall in inflation is highly unlikely, but it is positive to see it finally moving in the right direction.”
