UK CPI inflation was 0.3% MoM (vs 0.4% MoM expected) and 2.5% YoY (vs 2.6% YoY expected) in December, down from 2.6% YoY in November. Core inflation was also cooler than expected at 0.3% MoM (vs 0.5% MoM) and 3.2% YoY (vs 3.4% YoY) which is the lowest annual rate since September 2021.

The CPI goods annual rate rose from 0.4% YoY to 0.7% YoY, while the CPI services annual rate saw a substantial cooling as it fell from 5.0% YoY to 4.4% YoY, the lowest rate since March 2022.

Restaurants & hotels (-0.08 ppts) and recreation & culture (-0.03 ppts) were two key services segments of inflation that contributed to the deceleration in the annual CPI rate.