Inflation fell unexpectedly to 2.5% in December, the Office for National Statistics said, after economists expected the rate to stay the same.
It marks a very slight decrease from the 2.6% Consumer Prices Index inflation rate in November, and means that prices are still rising, but at a slower rate than before.
Most analysts had been expecting the inflation rate to remain unchanged at 2.6% last month, although December’s headline figure nonetheless remains above the Bank of England’s 2% target.
Grant Fitzner, the ONS’s chief economist, said: “Inflation eased very slightly as hotel prices dipped this month, but rose a year ago. The cost of tobacco was another downward driver, as prices increased by less than this time last year.
“This was partly offset by the cost of fuel and also second-hand cars, which saw their first annual growth since July 2023.”
Responding to the fall in CPI inflation, Chancellor Rachel Reeves said she would “fight every day” to improve people’s living standards.
She said: “There is still work to be done to help families across the country with the cost of living.
“That’s why the government has taken action to protect working people’s payslips from higher taxes, frozen fuel duty and boosted the national minimum wage.
“In our plan for change, we were clear that growth is our number one priority to put more money in the pockets of working people.
“I will fight every day to deliver that growth and improve living standards in every part of the UK.”
Economists had predicted prices to pick up the pace again this year.
“Looking ahead, price momentum will only pick up from here,” Sanjay Raja, a senior economist for Deutsche Bank said.
“Increases to the National Living Wage and employer national insurance contributions will, we expect, push inflation higher over 2025. Higher energy prices won’t help either, nor will higher food prices, which are starting to emerge.”
More to follow
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