The consumer price index rose by 2.5% in December 2024, down from 2.6% in November, mainly due to price drops in the hotel and restaurant sector. One of the main reasons for the rate not dropping further was the cost of transport, specifically airline fare prices.

Inflation figures are causing people to predict minimal cuts in the base rate by the Bank of England over 2025.

Lindsay James, investment strategist at Quilter, said: ‘Markets are sceptical about the prospect of further rate cuts in the UK before May, pricing in less than two quarter-point cuts for the year as a whole.

‘While this data will show some encouraging signs of progress, much of this is negated once mortgage costs are factored in with CPIH, the CPI index including owner occupiers’ housing costs, remaining unchanged at an annual rate of 3.5%.

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