U.K. Inflation Eased in December, but Topped BoE Target

Annual inflation in the U.K. eased a little in December, but exceeded the Bank of England's target for the 11th month in a row, highlighting the ongoing squeeze on consumers precipitated by the pound's steep fall in 2016.

Consumer prices rose 3% on year in December, the Office for National Statistics said Tuesday, compared with a rise of 3.1% a month earlier.

The ONS said it is too early to say whether the modest decline represents the start of a sustained fall in inflation after almost a year of rapidly rising prices.

There were mixed signals on inflationary pressures in the wider economy: Prices charged by companies at the factory gate rose 3.3% on year in December--a faster annual rate than the previous month.

Companies' raw-material costs, though, rose only 4.9% on year to mark the slowest pace of growth since July 2016, which was a month after Britons' decision to leave the European Union sent the pound tumbling, pushing up the price of imports.

The ONS said inflation in December was fueled by increases in prices of food, alcohol, tobacco and furniture

The BOE raised its benchmark interest rate for the first time in a decade in November in an effort to bring annual inflation back to its 2% target. Officials led by Governor Mark Carney have signaled that they expect to lift borrowing costs two more times by the end of 2020 to take their benchmark rate to 1% from 0.5% currently.

The U.K.'s high inflation makes it unusual among advanced economies. Central banks including the U.S Federal Reserve and the European Central Bank are grappling with inflation that is puzzlingly low.

Write to Jason.Douglas@wsj.com and Wiktor Szary at Wiktor.Szary@wsj.com

(END) Dow Jones Newswires

January 16, 2018 04:52 ET (09:52 GMT)