London - UK
inflation accelerated more than economists forecast in December as signs
mounted that the pound’s decline is leading to a surge in import costs.
Consumer-price growth
increased to 1.6 percent, the highest since July 2014, from 1.2 percent in
November. That beat the 1.4 percent median forecast of economists. A separate
report showed the cost of imports soared at the fastest annual rate in more than
five years.
The data comes a day after
Bank of England Governor Mark Carney warned that UK consumers are facing fresh
headwinds this year as sterling’s 18 percent depreciation since the Brexit vote
pushes up prices. The BOE, which will publish new forecasts next month,
currently expects inflation to breach its 2 percent target within months.
The UK’s core rate of
inflation - excluding volatile food and energy - picked up to 1.6 percent in
December, the fastest since August 2014, the Office for National Statistics
said. Inflation based on a separate measure, the retail prices index, reached
the strongest since July 2014.
The cost of imports rose
16.9 percent year-on-year in December, the most since July 2011. Annual growth
in factories’ costs accelerated to 15.8 percent, also a five-year high.
Read also: Inflation at highest level in six months
As the BOE assesses the
outlook and balances its growth and inflation priorities, it says the next move
in interest rates could either be a tightening or a loosening. It cut the
benchmark rate in August after the UK voted to leave the European Union,
lowering it to a record-low 0.25 percent.
Economic developments depend
heavily on the UK’s new trading relationship with the EU. Prime Minister
Theresa May is expected to set out her plans in a speech on Tuesday. That could
include Britain
leaving the bloc’s single market for goods and services.
BLOOMBERG