Inflation slows for a second month, with rate easing to 10.5%

Ministers hailed signs inflation is finally on the way down today after the headline figure dipped.  

The annual CPI rate was 10.5 per cent in December, down from 10.7 per cent the previous month, with tumbling fuel costs helping ease the pain for Brits.

It is the second consecutive fall in the index, with experts suggesting the peak has passed after the 40 year high of 11.1 per cent in October. It could ease the pressure on the Bank of England to keep increasing interest rates – although another rise in a fortnight looks inevitable. 

However, Chancellor Jeremy Hunt warned there can be no letting up on efforts to tackle the curse of soaring prices. Ministers also vowed to hold firm against a wave of public sector strikes, saying giving in to demands for double-digit pay hikes would risk undoing the progress that has been made. 

Speaking after the figures were announced this morning, Mr Hunt said: ‘There is no room for any deviation from our central objective of the year, which is to halve inflation, so that we deal with, for example, the anger of public sector workers who are seeing their pay eroded, we deal with the pressure that pensioners are seeing when they are doing their weekly shop, the pressure on businesses worried sometimes about their viability.

‘This has to be our central mission and that’s why the Prime Minister has nailed his colours to the mast and said we are going to halve inflation over the next year.’

While CPI overall nudged down, food and drink inflation was up yet again to 16.8 per cent in December, from 16.4 per cent in November. That was the highest level since September 1977.

Everyday items were once again among those seeing the biggest price hikes, with surging costs of dairy products and sugar.

The spiralling price of goods and services has been one of the main drivers of widespread strikes across the country.

Workers including nurses – on strike today and tomorrow – teachers, and train drivers have demanded pay increases at the rate of inflation or above. 

British Chambers of Commerce head of research David Bharier said prices appear to be ‘stabilising’.

He said the second consecutive fall in the CPI rate of inflation ‘suggests the peak has now passed’ but rising prices remained a serious concern for firms.

‘A further fall in the growth of fuel costs was partially offset by continued increased inflation within the hospitality sector,’ he said.

‘This simply means that prices will stabilise at a much higher level than one year ago.

‘Inflation is still by far and away the top issue affecting businesses. Our latest research shows that inflation is a concern for 80 per cent of firms, close to the highest on record.’

Chancellor of the Exchequer Jeremy Hunt said: ‘High inflation is a nightmare for family budgets, destroys business investment and leads to strike action, so however tough, we need to stick to our plan to bring it down.

‘While any fall in inflation is welcome, we have a plan to go further and halve inflation this year, reduce debt and grow the economy – but it is vital that we take the difficult decisions needed and see the plan through.

‘To help families in the meantime, we are providing an average of £3,500 of support for every household over this year and next.’

Shadow Chancellor Rachel Reeves said ’13 years of wasted opportunities under the Tories have left our economy weak and families worse off.

‘Labour will stabilise our economy and get it growing.’

The news on inflation comes as nurses walk out across England today, affecting one quarter of trusts in the country.

The Royal College of Nursing, whose staff are striking for the first time in its history, has demanded a pay rise 5 per cent above inflation, but has since said it will accept a lower offer.

Government minister Robert Jenrick argued that the slight fall in inflation was a reason not to award striking public-sector workers with significant pay rises.

‘So, we have to approach this with great caution because inflation is the big evil.’

Grant Fitzner, chief economist at the Office for National Statistics (ONS), said: ‘Inflation eased slightly in December, although still at a very high level, with overall prices rising strongly during the last year as a whole.

‘Food costs continue to spike, with prices also rising in shops, cafes and restaurants.’

Helen Dickinson, chief executive of the British Retail Consortium, warned that prices would remain high despite the fall in the CPI rate of inflation.

‘They are keeping the price of many essentials affordable, expanding their value ranges, raising pay for their own staff and offering discounts for vulnerable groups.’