The UK’s rate of inflation slowed to 2.5% in the year to December, according to the latest figures published by the Office for National Statistics (ONS).

This was down from 2.6% in the 12 months to November, as restaurants and hotels helped to slow price rises.

On a monthly basis, however, the ONS data showed a 0.3% increase in inflation, although this was down from a 0.4% increase in December 2023.

With the annual rate of inflation falling for the first time in three months, some industry analysts have suggested it has improved the chances of the Bank of England (BoE) cutting interest rates at its next meeting.

“The slowdown will be very welcome for the Government,” investment Manager at Wealth Club, Nicholas Hyett, commented. “It increases the scope for the BoE to cut interest rates, boosting growth and lowering the cost of borrowing. That would create a little more financial headroom for the Chancellor and reduce the need for substantial cuts to public spending.”

CEO of Just Mortgages and Spicerhaart, John Phillips, added that the BoE is “standing at a crossroads between managing sticky inflation and supporting economic growth”.

“The latter cannot be understated given growing fears of stagflation,” Phillips said. “A slight reprieve or not, will a surprise slowing of inflation encourage the central bank to act faster than perhaps many are expecting – giving hope to those wanting to see further movement on interest rates.

“Either way, a remedy is clearly needed to help kickstart economic growth. In our world, we have seen a really positive start to the new year with high levels of buyer registrations and mortgage enquiries. If the MPC is able to respond to this positive news at its first meeting next month, that will certainly help sustain this.”

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