Unexpected drop in inflation lifts pressure off Rachel Reeves

Rachel Reeves has been handed breathing space after better-than-expected inflation figures raised expectations for a Bank of England rate cut and reduced UK borrowing costs. After a tough week for the government on the economy, official figures showed inflation unexpectedly cooled in December to 2.5%, down from 2.6% in the previous month, meaning prices rose at a slower rate. Lifting some of the pressure on the chancellor as she sought to talk up Labour’s growth agenda, the latest snapshot sent the yield – in effect the interest rate – on UK government bonds tumbling at the fastest rate since 2023.

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