UK inflation rises for first time in five months to 3.4% in December | Inflation

According to official figures, inflation in the UK rose to 3.4% in December for the first time in five months; This suggests that the Bank of England will give up making changes to interest rates next month.

The Office for National Statistics said the annual inflation rate, measured by the consumer price index (CPI), rose from 3.2% in November after falling in October and remaining stable in the previous three months. The figure beat City economists’ forecasts for a modest rise of 3.3%.

The increase in inflation indicates that the Bank of England’s interest rate setting committee will keep interest rates at 3.75% at its meeting in February. However, most economists expect a cut in April if price increases in the UK subside in the coming months.

Despite the rise, inflation is expected to decline overall in 2026, having been on a downward trend since September’s reading of 3.8%. The Bank of England expects inflation to be close to its 2% target by the middle of this year.

Chancellor Rachel Reeves has set covering living costs as the key target of her autumn budget in November, alongside £26bn of tax rises to help repair the public finances and fund the removal of the two-child benefit cap.

The bank said it expects its measures, including easing energy bills, prescription charges and fuel duty, to reduce headline inflation this year.

Employment figures released on Tuesday also show that inflationary pressures on the UK economy have eased, with wage growth slowing from 4.6% in the three months to October to 4.5% by November.

More details coming soon…