Bankinter | December CPI rises slightly above expectations: 3.4% versus 3.3% expected versus 3.2% previously. However, the underlying rate remained unchanged at 3.2% versus 3.3% expected. Services continue to be the biggest contributor to inflation: 4.5% versus 4.4% previously.
Bankinter analysis team’s view: Mixed data. Despite the rise in the overall rate, the core rate remains in line with the previous month. Lower wage pressures (weekly wage growth excluding bonuses 4.5% Nov 25 versus 5.8% Jan 25) will contribute to the slowdown in service prices, which make up the majority of the consumer basket. In addition, the anti-inflationary measures announced in the November budget (reduction in domestic energy bills, etc.) will help bring inflation down to the Bank of England’s 2% target.
Yesterday, we learned that the unemployment rate remained at 5.1%, its highest level in five years, with 43,000 jobs lost. The slowdown in inflation and weakness in the labour market give the Bank of England arguments to continue lowering interest rates.
