UK inflation falls to 2.5% in December

UK inflation fell slightly last month as hotel prices dipped and tobacco costs eased.

Prices rose 2.5% in the year to December, down from 2.6% the month before, the Office for National Statistics (ONS) said.

Despite the drop, the rate of price rises remains above the Bank of England’s target.

The latest figures come after pressure has increased on public finances in recent days due to government borrowing costs hitting their highest level for several years.

The value of the pound has also slumped against the US dollar, prompting criticism of the chancellor, Rachel Reeves, over her handling of the economy and Budget tax rises.

Grant Fitzner, chief economist of the ONS, said while hotel prices had fallen last month, the price decreases were offset by the cost of fuel and second-hand cars rising.

Tobacco prices also increased by less than in December 2023, he added, which was a factor in the overall rate of inflation coming down.