Inflation Rises to 4% Despite Falling Energy Costs, Forcing Rethink on Interest Rate Cuts
• Inflation rose to 4% in December, defying expectations of a fall, due to rises in tobacco and alcohol prices
• But energy bills are still predicted to fall in 2024, so interest rate cuts are still expected later this year
• Markets shifted predictions on size of cuts - now seen as less likely rates will fall as much as previously forecast
• Falling energy prices should drive inflation down, giving Bank of England confidence to cut rates, possibly by June
• While inflation trend is downwards, supply chain issues like ship diversions around Africa could cause further price rises