UK Inflation Falls, Signals Possible Rate Cut

UK inflation unexpectedly fell to 2.5% in December, down from 2.6% the previous month, driven by easing price pressures in the services sector. This decline has fueled expectations for a possible interest rate cut by the Bank of England in February, providing relief to Chancellor Rachel Reeves amidst recent economic turbulence. Despite this positive development, inflation remains above the Bank’s target of 2%, with forecasts suggesting it may exceed 3% in 2025. The reduction in inflation has not significantly impacted the pound's value, which remains relatively stable. Analysts suggest that the Bank of England may proceed with gradual rate cuts throughout the year, although concerns about potential increases in inflation persist due to rising energy costs. The recent inflation data has brought a 'sigh of relief' to financial markets, but experts caution that challenges remain for the UK economy.