Inflation dips but price pressures on business remain - Chamber

An unexpected dip in inflation to 2.5 per cent could pave the way for an interest rate cut, business leaders said today.

According to the Office for National Statistics (ONS), UK inflation unexpectedly dipped in December for the first time in three months as hotel prices fell and tobacco costs eased.

Prices rose 2.5 per cent in the year to December, down from 2.6 per cent the month before.

Despite the rate of price rises remaining above the Bank of England's target, expectations of an interest rates cut next month have grown.

Raj Kandola (pictured), director of external affairs at Greater Birmingham Chambers of Commerce, said: “Following a period turbulence on the bond markets, the Chancellor will be delighted to see that the rate of inflation fell in December - confounding many city analysts' expectations.

“Now all eyes will turn to the Bank of the England as today's results are likely to enhance the prospect of an interest rate cut in the near future.

“Early analysis from our latest Quarterly Business Report suggests price pressures remain prevalent for the majority of firms in the region and the Government will need to set out a clear plan on how they will reduce these costs in the coming months - particularly when it comes to minimising trade disruption, making it easier to hire staff and reducing energy costs.”