PwC comments on ONS December CPI figures

Hannah Audino, economist at PwC UK, said,

“The same culprits - higher energy, transport and household goods prices - pushed the 12-month CPI rate to a 30-year high of 5.4% in December.

“Intensifying cost of living pressures, combined with relatively positive GDP and labour market data this month, make it more likely that the Bank of England will consider another modest rise in interest rates in their next MPC meeting in February. 

“However, given it takes around 12-18 months for the full impact of an increase in rates to be realised in the economy, inflation is expected to continue to rise in the short-term. This will provide no respite to households being squeezed by rising prices and falling real wages. 

“Further challenges lay ahead in the next quarter, as the rise in the energy price cap and the reversal of VAT cuts in hospitality and tourism create the perfect storm for higher consumer prices. High inflation is one of the biggest risks to the UK’s economic recovery this year.”