UK Retail Inflation Stays Steady in December

British annual consumer price inflation held at 2.1 percent as expected in December, above the Bank of England's target for the third month running, official data showed on Tuesday.

The Office for National Statistics said consumer prices rose 0.6 percent last month, the biggest monthly gain in a year, keeping the annual rate at 2.1 percent.

The biggest upward effect came from food prices, particularly vegetables, where prices rose in December compared with a fall a year earlier, the ONS said.

The biggest downward effect impact came from utility bills, which rose by less than they did in the same period last year. However, the ONS said that was likely to change in coming months due recent price hikes by energy providers.

There was also downward pressure on prices from furniture, particularly kitchen units and leather sofas.

Policymakers had the data for their meeting last week when they kept interest rates at 5.5 percent. Most economists still expect the central bank to cut interest rates next month to shore up a slowing economy.

The Retail Price Index, on which most pay deals are based, eased to 4.0 percent as expected. This could ease pressure on wage demands in the key New Year pay round.

The RPIx index, which excludes mortgage payments, also eased as expected to 3.1 percent.

Policymakers may be relieved to see that core inflation pressures remained benign, with the annual rate holding steady at 1.4 percent.