Commenting on expectations for Consumer Price Inflation (CPI) in December 2023 to be announced tomorrow (Wed 17^th Jan 2024), Chris Arcari, Head of Capital Markets, Hymans Robertson, said:

“Consensus expectations are for headline CPI inflation to have eased a little to 3.8% year-on-year in December, from 3.9% year-on-year in November.

“Recent shipping and energy-price rises – owing to disruption in the Red Sea – might slow inflation’s decline. But as it stands, those risks are unlikely to stop inflation falling further and prevent rate cuts this year from the major central banks, including the Bank of England. These risks could be contributing factors, however, alongside still-elevated levels of wage growth and core inflation, if we do see fewer rate cuts than expected.¹

"Shipping costs have risen a lot but are still way below the levels touched in the pandemic, when there was a massive shift in demand from services to goods. We’re currently seeing the unwinding of that. Services, which are far less reliant on goods trading, are much stronger than the contracting manufacturing sector. That said, the global economy is weaker overall, and policymakers are no longer hosing down consumers with fiscal and monetary support."

¹ As of 11 January, overnight-index swap data suggested around five 0.25% pa interest-rate cuts from the Bank of England in 2024, with a first cut being priced as most likely in May.