UK inflation rose to 4% in December 2023, up 0.1% from 3.9% in November. The news prompted a range of reaction from the financial advice sector.
Even though the increase is small, it is a surprise and “the markets really don’t like surprises”, said Hargreaves Lansdown head of personal finance Sarah Coles.
However, Coles does believe “inflation is likely to trend downwards from here but not particularly fast, and with plenty of bumps along the way”.
Chancellor of the exchequer Jeremy Hunt added: “As we have seen in the US, France and Germany, inflation does not fall in a straight line.”
Still, Hunt believes the UK’s plan is working.
The increase has been attributed to rising alcohol and tobacco prices during the festive period.
Additionally, Quilter Cheviot head of fixed interest research Richard Carter also believes recent events that have taken place in the Red Sea “could have a considerable impact on consumer prices in the coming weeks”.
AJ Bell head of financial analysis Danni Hewson said the rise in inflation is a tiny spike but “psychologically it’s a mountain”.
Hewson added: “While markets are still hopeful rate cuts will come later this year, the date for that to commence has slipped back.
“Looking forward, there are so many variables at play, central bankers are likely to want to keep their powder dry for as long as they can.
“But walking that tightrope has just got a little bit harder as we wait and see whether the situation in the Middle East escalates or if a quick solution can be found.”
Standard Life part of Phoenix Group managing director for retail direct Dean Butler said, “Hopefully this month’s figure is a blip and we’ll see the forecasted fall in inflation soon.”
But this news will come as a blow to struggling households, he added.
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