DAVY VIEW

UK inflation declined marginally in December, helped by services price disinflation. This marks an improvement on recent months, especially for a subset of non-volatile services (excluding air travel, package holidays and education). Wage growth has also remained stubbornly high, but forward-looking indicators suggest some decline is likely this year, in line with the Bank of England’s forecast. We therefore expect faster disinflation for non-volatile services in 2025, and we predict two cuts to Bank Rate this year.