UK Inflation Drops to 2.5% in December

UK inflation decreased slightly to 2.5% in December, down from 2.6% the previous month, providing a temporary relief for Chancellor Rachel Reeves amid rising pressures in the financial markets. Despite this marginal decline, inflation remains above the Bank of England's 2% target, leading to concerns about potential interest rate cuts and fiscal management. Analysts predict that rising oil prices and increases in the National Living Wage could contribute to renewed inflationary pressures in the coming months. The recent drop in inflation has eased some market turbulence, but fears of sustained higher borrowing costs could challenge Reeves's fiscal rules and commitments. Economists are divided on the outlook, with some warning that inflation may rise again, complicating the Chancellor's plans for economic growth. Reeves has indicated readiness for emergency spending cuts if necessary to maintain fiscal balance.