Economic Review – December 2024
Please find below our Economic Review for December 2024
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Headline inflation at eight-month high
Release of the latest inflation statistics showed consumer prices are now rising at their fastest rate since March 2024, while last month also saw Bank of England (BoE) policymakers become more divided over the need to cut interest rates.
Data published by the Office for National Statistics (ONS) showed the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current
month with the same period a year earlier – rose from 2.3% in October to 2.6% in November. ONS said the rise was primarily driven by an increase in motor fuel and clothing prices, which was only partially offset by a drop in air fares.
November’s CPI rise was, though, in line with expectations expressed in a Reuters poll of economists. Additionally, there
was some relief in relation to underlying price pressures, with services inflation – a measure closely monitored by the BoE – remaining unchanged at 5.0%.
The latest decision of the BoE’s
interest-rate setting body was announced a day after the inflation release, with the nine-member Monetary Policy Committee (MPC) voting by a 6-3 majority to maintain Bank Rate at 4.75%. The three dissenting
voices each preferred an immediate 0.25 percentage point reduction in order to boost growth, but the six-strong majority, which included BoE Governor Andrew Bailey, expressed concern about wage growth and ‘inflation persistence.’
Commenting after announcing the Committee’s decision, Mr Bailey said he still believed the path for interest rates was “downwards.” However, he added, “We think a gradual approach to future interest rate cuts remains right, but with the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year.”
The next MPC meeting is scheduled for early next month, with the outcome of the Committee’s deliberations due to be announced on 6 February.
