Surprise fall in inflation boosts interest rate cut hopes

UK inflation unexpectedly fell in December, leading to expectations of an interest rate cut next month as prices rose 2.5% in the year, down from 2.6% the previous month. The drop was driven by lower hotel prices and smaller airfare increases, with investors now backing a second cut by the end of the year. Government borrowing costs have eased, and Chancellor Rachel Reeves faces pressure to address the market turmoil caused by her Budget policies.

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