Investing.com - Consumer price inflation in the U.K. inched up more than expected in December, but concerns over deflationary pressures remained, official data showed on Tuesday.
In a report, the U.K. Office for National Statistics said the rate of consumer price inflation rose by a seasonally adjusted 0.2% last month, above expectations for a gain of 0.1% and up from 0.1% in November.
Month-over-month, consumer price inflation rose 0.1% in December, matching forecasts and following a flat reading in the prior month.
Movements in transport costs, particularly air fares and to a lesser extent motor fuels, were the main contributors to the rise in the rate. Downward pressures from prices for alcohol and tobacco along with food and non-alcoholic beverages partially offset the rise.
Bank of England Governor Mark Carney will now have to write an open letter to the Chancellor of the Exchequer, George Osborne, as inflation is more than a percentage point below the central bank's target of 2.0%.
Bank of England officials have said recently they expect inflation to hover around zero for much of this year, before accelerating back to target during 2016 and 2017.
Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at a seasonally adjusted rate of 1.4% last month, above forecasts for 1.2% and up from 1.2% in November.
The retail price index increased 1.2% in December, beating expectations for 1.1% and up from 1.1% a month earlier.
The data also showed that the house price index rose 7.7% in November, above forecasts for a gain of 7.3% and following a 7.0% increase in October.
GBP/USD rose to 1.4329 from around 1.4320 ahead of the release of the data, while EUR/GBP was at 0.7592 from 0.7600 earlier.
Meanwhile, European stock markets held on to strong gains. London’s FTSE 100 rose 1.5%, the EURO STOXX 50 rallied 1.8%, France's CAC 40 jumped 2%, while Germany's DAX advanced 1.8%.