#uk-inflation

#uk-inflation

UK inflation rose for the first time in five months over the Christmas period, driven by higher tobacco prices following tax rises announced by the chancellor and a sharp increase in airfares, according to official figures. Data published on Wednesday by the Office for National Statistics showed that consumer price inflation climbed to 3.4 per cent in December, up from 3.2 per cent in November and above economists' expectations. It marked the first increase in inflation since July last year and keeps price growth well above the Bank of England's 2 per cent target.

The Bank of England expects Rachel Reeves's budget will reduce the UK's headline inflation rate by as much as half a percentage point next year. In a boost for the chancellor after last month's high-stakes tax and spending statement, Clare Lombardelli, a deputy governor at the central bank, said its early analysis showed the policies would lower the annual inflation rate by 0.4 to 0.5 percentage points for a year from mid-2026.

The latest figures from the Office for National Statistics (ONS) show inflation slipping from 3.8% in September, though the fall was not as sharp as economists had forecast. The reduction strengthens hopes that price pressures have peaked and could pave the way for future interest rate cuts, even as inflation remains above the Bank of England's 2% target.

The Consumer Prices Index (CPI) rose to 3.8 per cent last month, up from 3.6 per cent in June, according to the Office for National Statistics (ONS). This marks the highest rate since January 2024, when inflation stood at 4 per cent. The ONS highlighted transport costs as the primary driver behind the increase, particularly a significant surge in flight prices.