Inflation remains at 2.7%

Hot air baloons

UK inflation was unchanged in December, despite increases in utility bills.

The Consumer Prices Index (CPI) stood at 2.7% in December, unchanged for the third consecutive month.

While some might be underwhelmed by this, Vicky Redwood, chief UK economist at Capital Economics, believes the breakdown is encouraging.

Price hikes in gas and electricity bills were widely expected to add around 0.3% to inflation, so the fact that this was offset by other factors to achieve the same overall rate is a positive.

Retailer discount

Redwood says there was a fall in "core inflation" from 2.6% to 2.4%, because "sluggish consumer demand seems to have prompted retailers to discount a bit more heavily than last year over the festive period".

She does warn however that inflation could creep up to 3% in the near future after the January sales finish and predicts it will "probably stay relatively high for most of this year".

The Retail Prices Index (RPI) increased slightly in December to 3.1%, from 3% in November, also largely due to rising utility bills.

This article was written for our sister website Money Observer

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