UK inflation rises to 4.0 in Dec from Nov39;s 3.9
Rise in tobacco duty adds to price pressure
Markets scale back bets on May rate cut by BoE
Core inflation fails to fall as expected
Food and drink inflation lowest since April 2022

LONDON, Jan 17 Reuters Britain39;s annual rate of consumer price inflation CPI sped up for the first time in 10 months in December following an increase in tobacco duty, increasing to 4.0 from a morethantwoyear low of 3.9 recorded in November.

The figures bucked expectations among economists in a Reuters poll for a further decline in CPI to 3.8 and led to a jump in sterling as investors scaled back their expectations for a cut in interest rates by the Bank of England in May.

The BoE raised interest rates 14 times between December 2021 and August 2023, taking rates to a 15year high of 5.25 after inflation surged to a 41year high of 11.1 in late 2022 and proved slow to fall thereafter.

However, inflation began to fall faster than expected in the latter months of last year, leading many economists to predict that it would be back at the BoE39;s 2 target by April or May this year, around 18 months sooner than the BoE was predicting.

The rise in Britain39;s inflation rate followed increases seen in the euro zone and United States in December and unlike earlier in 2024 British inflation is no longer significantly higher than in other European countries.

Michael Saunders, a former BoE policymaker, told BBC radio that he did not think the…