By LONDON (Reuters) -British inflation unexpectedly slowed to an annual rate of 2.5% in December from 2.6% in November and core measures of inflation watched closely by the Bank of England fell more sharply, official figures showed on Wednesday.
Economists polled by Reuters had pointed to a headline inflation reading of 2.6%.
The BoE – which will announce its next interest rate decision on Feb. 6 – forecast in early November that inflation would be 2.5% in December.
Sterling fell after the figures were published.
Core inflation, which excludes energy, food, alcohol and tobacco prices, fell to 3.2% from 3.5% in November. The Reuters poll had pointed to a smaller drop to 3.4%.
Services inflation stood at 4.4% in December compared with 5.0% a month earlier, the ONS said. Economists had forecast it would dip only to 4.9%.
The BoE looks at both services and core inflation as a better guide of underlying price pressures in the economy, especially those caused by persistent wage growth.