KPMG comments on today’s inflation data

“Inflation moderated slightly to 2.5% in December but we expect headline inflation to remain above target over the coming year. Gas prices have increased over the past month as colder than average weather has driven a notable surge in demand. Meanwhile, potential trade frictions have raised concerns around supply. As a result, the Ofgem price cap is likely to rise again in the second quarter, following the increase in January.

“The Budget measures which are set to come into effect in April are expected to contribute to upward pressure on underlying inflation. Businesses may look to pass on higher employment costs to consumers and we expect this to drive an increase in core inflation in the first half of 2025.

“Despite the welcome fall in services inflation, today’s data is unlikely to change the Bank of England’s cautious approach to cutting interest rates. The pace of cuts will likely remain slow as it assesses the second-round effects from the Budget. Nonetheless, we think markets are under-pricing the number of cuts we’ll see this year, with inflation expected to moderate in the second half of the year. We expect the MPC to continue easing policy over 2025, taking base rates down to 4% by the end of the year.”

-ENDS-

For media enquiries, please contact:

Gerard Swinley, Corporate Communications

Tel: +44 (0) 20 3078 3948
Mob: +44 (0) 7510 375540
Email: gerard.swinley@kpmg.co.uk

KPMG Press Office
Tel:  +44 (0) 207 694 8773

Notes to Editors:

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 20 offices across the UK with approximately 18,000 partners and staff. The UK firm recorded a revenue of £2.96 billion in the year ended 30 September 2023.

KPMG is a global organisation of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 143 countries and territories with more than 273,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.