Has inflation been tamed in the UK?

After a surprise drop in inflation, the Bank of England is set for more rate cuts in the year ahead. But investors are cautious about pricing in too many cuts

Governor of the Bank of England, Andrew Bailey
(Image credit: Photographer: Hollie Adams/Bloomberg via Getty Images)

Britain is “bumbling” into the New Year, says Eshe Nelson in The New York Times. Consumers are “downbeat” after “disappointing economic news”. Worries about inflation persist, with the Bank of England (BoE) not expecting a sustainable return to the 2% target until 2027. As a result, the Bank has been cautious, cutting rates by only half a percentage point in 2024, even as US and European central bankers cut borrowing costs by a full point.

UK gilts wobbled earlier this month, says David Smith in The Sunday Times. But a degree of calm returned following news that annual inflation fell last month to 2.5%, around the long-term average, coupled with “encouraging falls in core and service-sector inflation”. That sets up the BoE for another interest rate cut in February. With the economy sluggish, it could be the first of several.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.