Thursday, January 22, 2026- The latest data from the UK’s Office for National Statistics shows that inflation rose to 3.4% in December 2025, up from 3.2% in November and slightly above economists’ forecasts of around 3.3%. This marks the first uptick in headline inflation in five months and comes as volatile price components surged during the festive period, driven by higher tobacco prices, rising airfares, and increased food costs such as bread and cereals. Analysts say the rise was larger than expected and reflects short‑term seasonal pressures rather than a sustained inflation surge.
Key contributors to the December increase included steep airfare price jumps linked to holiday travel and tobacco duty increases introduced in the Autumn Budget, which pushed the cost of cigarettes and related goods higher. Food inflation also climbed, with essential grocery items showing notable price increases compared with a year earlier. These factors combined to lift consumer prices at the end of the year, keeping inflation well above the Bank of England’s 2% target and continuing cost‑of‑living pressures for households.
Despite the rise, many economists and market observers still expect inflation to trend downward through 2026 as one‑off holiday effects fade and broader price pressures ease. The Bank of England, which recently held its base interest rate at 3.75%, faces a delicate balance between supporting growth and guiding inflation back toward target. With services inflation remaining elevated and wage growth cooling, future monetary policy decisions will likely hinge on upcoming inflation and labour market reports.
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