British Prime Minister Rishi Sunak speaks, as he attends political festival Atreju organised by Italian Prime Minister Giorgia Meloni's Brothers of Italy right-wing party, in Rome, Italy, December 16, 2023.
Credit: Reuters Photo
London: British Prime Minister Rishi Sunak on Wednesday welcomed the “good news” of falling prices ahead of the Christmas holiday period as official statistics revealed that inflation had dropped to 3.9 per cent, hitting the lowest level for the economy over two years.
It comes as some much-needed festive cheer for the British Indian leader who had made halving inflation one of his top priorities at the start of the year, when it was hovering around the 11 per cent mark.
According to the Office for National Statistics (ONS), inflation, or the rate at which prices are rising in the UK economy— dropped from 4.6 per cent last month and is now under double the 2 per cent target aimed for by policymakers at the Bank of England.
“A year ago inflation was at 11.1 per cent. Today, it’s down to 3.9 per cent. This is good news for everyone in this country,” said Sunak in a social media post.
The ONS said that falling petrol prices and slowing prices for food and household goods were largely behind the drop in inflation. However, experts point out that many households will not feel better off any time soon as energy bills and borrowing costs remain high.
“Inflation has more than halved, from over 11 per cent to 3.9 per cent – so we can see the plan is working,” said UK Chancellor Jeremy Hunt.
“With inflationary pressures easing, alongside the major business tax cuts I announced in the autumn statement, we are back on the path to healthy sustainable growth...Once you do the hard work to squeeze inflation out of the system, you can start looking forward to the kind of growth that will see people's wages go up," he said.
It is being dubbed as an early Christmas present for the Sunak-led government which is lagging behind most of its other targets set for the year, such as stopping the boats of illegal migrants crossing the English Channel and cutting long waiting lists for medical procedures on the state-funded National Health Service (NHS).
Meanwhile, when and by how much the Bank of England will cut interest rates early next year will now become the focus to help bring down the high borrowing costs.
The central bank has put up interest rates 14 times since December 2021 to try to slow price rises, with the 5.25 per cent rate at present a 15-year high.
Markets now anticipate that the UK base rate will drop below 4 per cent by the end of next year and that the Bank of England should kick off its loosening cycle in the first half of 2024.