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Inflation up but interest rate cuts still expected

Inflation figures for December show a small increase to 4% from 3.9% in November.

Economists had expected inflation to fall slightly, but a 12.9% increase in prices for alcohol and tobacco were behind the rise.

Expectations for the Bank of England to cut the base rate later in the year remain though. Energy bills are predicted to drop in 2024 and inflation has fallen from its peak of 11.1% in October 2022 more quickly than the Bank predicted.

The Bank's target is 2%, so December's inflation figure of 4% is still double the target.

Deputy chief UK economist at Capital Economics, Ruth Gregory, has been quoted as saying that she expects inflation to have fallen below 2% by April and feels that interest rates could be cut by June.

The Bank of England's base rate is currently 5.25%.

See: https://www.bbc.co.uk/news/business-67993276

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