Inflation falls back for the first time since June to 3% - ONS

December CPI inflation over 5.2% dashing hopes of RBI rate

United Kingdom inflation has peaked and is now on a downward trajectory, market commentators have said, as today's figures from the Office for National Statistics (ONS) show the Consumer Price Index (CPI) dropped from a five-year high of 3.1% in November to 3% in December.

The consumer price index eased to 3% last month from a five-year high of 3.1% in November, raising the prospect that inflation may have peaked, easing some of the pressure on United Kingdom consumers. The ONS figures seem to offer proof the Bank of England is right and the worst effects of the fall in the pound have now filtered through. The central bank's inflation report has pointed towards inflation peaking in 2017, for it to start easing back in 2018, which is precisely what we are seeing.

'But the BRC's food shop price index suggests that supermarkets took a breather from implementing big sterling-related price rises.

Despite the modest fall, inflation is still way beyond the Bank of England's mandated target of two per cent, noted Matthew Brittain, investment analyst at wealth manager Sanlam UK. The Office for National Statistics said it's too early to say if the move is the "start of any longer-term reduction in the rate". Weaker Sterling has brought a wave of price hikes in 2017.

Tobacco inflation picked up to 8pc, furniture price rises increased to 3.3pc and the cost of going to holiday centres and camp sites soared by 15.8pc.

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"All this has implications for interest rates".

Hargreaves Lansdown senior economist Ben Brettell said apart from the "Brexit noise", the UK's economic situation is in keeping with the majority of the developed world, with an ageing demographic and disruptive technologies causing price pressure and limiting the BoE's incentive to hike rates.

The British Retail Consortium's (BRC) head of retail insight and analytics Rachel Lund added: "We are likely to continue to see inflation falling back this year as, 18 months on from the referendum, currency impacts have mostly fed through and are now falling out of the yearly calculations".

The evidence for slow of the United Kingdom consumer spending raises after the official data in 2017 showed the poorest household spending growth in five years against the backdrop of high inflation and Brexit's concerns over business investment.

On a month-on-month basis, the headline index increased by 0.59 percent in December 2017, 0.19 percent points higher from the rate of 0.78 percent recorded in November.

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