United Kingdom December headline CPI increased to 0.2 percent y/y from 0.1 percent y/y in November, in line with consensus. December Core CPI data was slightly stronger than forecast as it continued to surprise for the second consecutive month to the upside.
The rise was mainly led by services inflation, which rose from 2.4 percent in November to 2.9 percent, while goods inflation eased to -2.1 percent from -1.9 percent. The upward pressure in services inflation was driven primarily by air fares as it advanced 26.8 percent y/y, which made up for about 0.16pp of the rise in headline inflation.
The food & non-alcoholic beverages, alcohol & tobacco and clothing & footwear components all came in weaker than expected, but was compensated by the rise in air fares.
"Overall, we remain of the view that core inflation is likely to remain on a gradual upward trend but we do not expect it to accelerate decisively any time soon. In this respect, it does not affect our view regarding our call for the Bank of England's first hike being in Q4 16" - Barclays
