UK inflation rate drops back to 3%

The UK’s inflation rate has fallen for the first time since June, mainly due to the impact of air fares.

The inflation rate dipped to 3% in December, down from November’s rate of 3.1% – a six-year high. The Office for National Statistics (ONS) said that while air fares rose last month, it had a smaller impact than at the same point in 2016. The ONS added it was too early to say if this was the start of a longer-term reduction in the rate of inflation. The Bank of England has said it thinks inflation peaked at the end of 2017 and will fall back to its target of 2% this year. In November, the Bank’s Monetary Policy Committee (MPC) raised its key interest rate for the first time in more than a decade from 0.25% to 0.5%. But Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said:

The continued weakness of underlying price pressures means that the MPC has little need to rush the next rate hike.