Economists: Decline in UK service sector inflation may help central bank cut interest rates in the summer
According to a report by Jin10, James Smith, an economist at ING International, said that the decline in service sector inflation is particularly helpful for the Bank of England as it hopes to bring the rate of price increases down to sustainable levels. The overall CPI growth rate in the UK decreased from 4.6% in October to 3.9% in November, and the service sector inflation rate dropped from 6.6% a month ago to 6.3%, which will be especially pleasing for the Bank of England. Sticky inflation in the service sector has been seen as a factor supporting core inflation due to high wage growth and increased demand for services such as holidays and hotels. Smith said that service prices may continue to rise at the same pace for some time but should ease from spring and could reach 4% by summer, which "increases the possibility of a summer interest rate cut by the central bank."
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