UK inflation cools slightly; house prices fall in November

(Alliance News) - Inflation in the UK cooled slightly in December and the average UK house price fell in November, the latest figures from the Office for National Statistics showed on Wednesday.

In December, the consumer price index rose annually by 10.5%, compared to a 10.7% rise in November. Consensus had expected 10.6% inflation last month, according to FXStreet.

The print is down a from a four-decade high of 11.1% in October.

On a monthly basis, CPI rose by 0.4% in December, the same pace as in November and in line with market expectations.

CPI, including owner occupiers' housing costs, rose by 9.2% in December, slowing from 9.3% in November.

Core inflation - which excludes energy, food, alcohol, and tobacco - remained unchanged a 6.3%.

In the wake of the print, sterling strengthened against the dollar. The pound was quoted at USD1.2345 at around 1000 GMT on Wednesday morning, up from USD1.2278 at the London equities close on Tuesday.

The ONS said the largest downward contribution to the change in both CPI and CPIH annual inflation rates between November and December were transport, clothing and footwear, and recreation and culture.

Earlier this month, the Bank of England's chief economist said that a "distinctive context" within the UK creates the potential for inflation to prove "persistent".

Hargreaves Lansdown's Susannah Street said on Wednesday, that with energy prices set to stay elevated and "relentless" food price rise continuing, inflation will likely stay "stickier" for long, particularly with the jobs market "still tight".

"So there is still a long way to go, and it looks like investors should brace for further rate rises from the Bank of England, with a 0.5% increase still firmly on the cards next month," she argued.

In December, the Bank of England raised UK interest rates by 50 basis point to 3.5% in an attempt to return inflation to its 2% target.

In February, the Bank of England will meet again. Currently, markets expect another 50 basis point rise in rates.

Separately on Wednesday, the ONS reported that the average UK house prices rose by 10.3% annually in November, compared to a rise of 12.4% in October.

The average UK house price was GBP295,000 in November. This is GBP28,000 higher than this time last year but a slight decrease from last month's record high of GBP296,000.

By Heather Rydings, Alliance News senior economics reporter

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