UK inflation increased to 3.4% in the 12 months to December 2025,\u00a0based on the Consumer Prices Index (CPI) measure\u00a0from the Office for National Statistics (ONS).<\/p>\n
The increase in price changes was unexpected, and the first rise in five months, as price rises slowed in the second half of 2025.<\/p>\n
Among the chief drivers of the surprise uptick were alcohol and tobacco duty increases, rising airfares and food cost increases.<\/p>\n
Commenting on the figures, ONS chief economist Grant Fitzner said: \u201cInflation ticked up a little in December, driven partly by higher tobacco prices, following recently-introduced excise duty increases.<\/p>\n
\u201cAirfares also contributed to the increase with prices rising more than a year ago, likely because of the timing of return flights over the Christmas and New Year period. Rising food costs, particularly for bread and cereals, were also an upward driver.\u201d<\/p>\n
However, core CPI, which excludes volatile prices such as energy, food, alcohol and tobacco, rose by 3.5% year-on-year \u2013 unchanged on the figure from the previous report.<\/p>\n
Fitzner continued: \u201cThese were partially offset by a fall in rents inflation and lower prices for a range of recreational and cultural purchases.<\/p>\n
\u201cThe annual increase in the prices for goods leaving factories was unchanged this month while the increase in the cost of raw materials for business slowed, driven by lower crude oil prices.\u201d<\/p>\n
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Inflation outlook<\/strong><\/p>\n The surprise inflation increase looks largely the result of Government-driven tax increases. The\u00a0wider expectation for 2026\u00a0is that inflation will continue to slow and this will encourage the Bank of England to continue cutting its base rate.<\/p>\n However, the Bank of England\u2019s Monetary Policy Committee (MPC) is due to meet on 5 February to make its next rate decision. The unexpected inflation figures could prompt the MPC to take a more conservative approach, given the committee\u00a0was already finely balanced\u00a0on whether it should cut or hold its base rate.<\/p>\n Reports now suggest\u00a0that investors believe a base rate cut will now not come until the MPC\u2019s April meeting.<\/p>\n Overall, inflation continues to slow while the general outlook for rates this year still calls for easing. This is especially the case given\u00a0rising unemployment\u00a0which now presents a fresh headache for policymakers.<\/p>\n If you have any considerations about your wider finances and long-term plans with changing developments in mind, it is essential to consider speaking with a financial planner like ourselves, to ensure your goals are not compromised by either changing events or decisions made around speculation on the UK economy.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" UK inflation increased to 3.4% in the 12 months to December 2025,\u00a0based on the Consumer Prices Index (CPI) measure\u00a0from the Office for National Statistics (ONS). The increase in price changes was unexpected, and the first rise in five months, as price rises slowed in the second half of 2025. Among the chief drivers of the surprise uptick were alcohol and tobacco duty increases, rising airfares and food cost increases.…<\/p>\n