UK inflation December 2025
A customer browses fruit and vegetables for sale at an indoor market in Sheffield, United Kingdom. The OECD recently predicted that the UK will experience the highest inflation of all developed economies this year.
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The inflation rate in the UK rose to 3.4% in December, above the 3.3% forecast of economists surveyed by Reuters.
The inflation rate fell sharply to 3.2% in the twelve months to November, with data encouraging the Bank of England to cut interest rates at its final meeting of the year last month.
Core inflation, excluding energy, food, alcohol and tobacco, was 3.2% in December, unchanged from November. latest figures From the Office for National Statistics.
“Inflation rose slightly in December, partly driven by higher tobacco prices following recently introduced excise duty increases,” ONS Chief Economist Grant Fitzner said. commented on X Wednesday.
“Flight tickets also contributed to the rise; prices rose more than a year ago, likely due to the timing of return flights over the Christmas and New Year period. Rising food costs, particularly for bread and cereals, also contributed to the rise,” he added.
The ONS noted that these increases were partly offset by a decline in rent inflation and lower prices on a range of leisure and cultural purchases.
Following the data, sterling remained largely flat against the dollar at $1.3231.
The figures, which follow Monday’s employment data showing that the cooling in the labor market continues, raise doubts about whether the BOE will continue the interest rate cut expected in February or wait a little longer.
“A small monthly increase in prices is unlikely to worry policymakers at the Bank of England in the short term, particularly as wage growth continues to trend downward,” Scott Gardner, chief investment strategist at JP Morgan Personal Investing, said in an emailed comment on Wednesday. he said.
“If wage growth continues to fall and this is reflected in inflation data, this could put pressure on the Bank of England to cut interest rates faster than expected. Markets are currently pricing in one or two cuts this year, but this could change as 2026 inflation data begins to arrive,” he said.
Matthew Ryan, head of Ebury Market Strategy, said he expected the BOE to remain on hold for at least the next few meetings.
“Hawks on the committee have long highlighted upside risks to UK inflation, but these arguments are losing steam amid the worsening employment picture and moderation in wage pressures,” he said on Tuesday.
