Reaction: Dun and Bradstreet on UK inflation drops

As today’s inflation rate announcement shows a fall of 10.5% in the year to December from 10.7% in November, Tommaso Aquilante, Associate Director of Economic Research at Dun and Bradstreet said: “It is vital to understand that a decline in inflation does not automatically mean a reduction in prices. Rather, prices continue to rise, albeit at a slower rate. Thanks to a mild winter, energy prices have decreased substantially, which may lead to a sharp drop in inflation during Q2 2023, given other factors remain constant. Despite this, interest rates are likely to keep rising, potentially as early as the February meeting of the Bank of England. However, financial conditions are already tight and wage growth, though increasing, remains slower than inflation, giving the BoE some reassurance on the risk of a wage-price spiral dynamic in the UK economy. The overall economic outlook remains negative, and it is imperative for companies to maintain a holistic view of their supply chain, financial pipeline, partners and customer needs to navigate the current challenges effectively.”