UK consumer inflation grows by 0.2% in December as it hits 11-month high, says ONS

Consumer price inflation in the UK edged slightly higher in December, official figures released on Tuesday (19 January 2016) showed. According to data published by the Office for National Statistics (ONS), Britain's consumer price index (CPI) grew by 0.1% month-on-month in December, while analysts had expected growth to remain stagnant, as it had been in the previous month.

On a year-on-year basis, CPI rose by 0.2% in the last month of 2015, generally in line with analysts' expectations and up from the 0.1% recorded in November, driven higher by movements in transport costs, particularly air fares and, to a lesser extent, motor fuels. The figure marked the first time since January that the rate of growth on annual basis exceeded 0.1% in 2015.

"CPI inflation will continue to rise in early 2016, as the drag from lower oil prices continues to fade and food inflation begins to strengthen now that supermarkets have passed on all of the fall in wholesale prices," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. "And while CPI inflation probably will take until May to reach 1%, this will not necessarily preclude an interest rate rise in the second quarter of this year."

Meanwhile, the core CPI, which strips out volatile components such as food and energy, rose to 1.4% in December from 1.2% the previous month, prompting analysts to suggest the upward trend could offer some support to those hoping that the Bank of England would raise interest rates.

"The Bank of England's most recent minutes reiterate its expectation for inflation to increase modestly in the coming months, though they also note that continued weakness in the oil price makes it likely this will be more gradual than previously forecast," said Ben Brettell, senior economist at Hargreaves Lansdown.