UK inflation has taken a surprising turn upwards, rising to its highest level in five months at 3.4% in December, according to official statistics. This uptick has sparked concerns among economists that the Bank of England will maintain interest rates steady next month, rather than making any changes.
The main drivers behind this increase were volatile items such as air fares and higher tobacco duties, which pushed up costs during the holiday period. However, despite these temporary spikes, inflation remains largely under control, with core inflation remaining flat at 3.2% - a rate that has been stable since November.
This news appears to be in contrast to the expectations of many City economists, who had forecast a modest rise in inflation to around 3.3%. Nevertheless, it does suggest that policymakers are taking a cautious approach, and may prefer to wait for further evidence before intervening in the economy.
The Bank of England's monetary policy committee is widely expected to keep interest rates at 3.75% when it meets in February, as they weigh up the latest data against their own economic forecasts. While most economists still anticipate a cut in April if inflationary pressures begin to ease over the coming months, this latest increase does add some uncertainty to the picture.
The Chancellor's pledge to tackle the cost of living remains firmly on track, with measures such as energy bill reductions and freezes to rail fares set to come into effect. While there is still much work to be done, it appears that progress is being made in addressing these pressing issues - and inflation may soon become a less dominant concern for policymakers.
However, wages are continuing to grow at a slower rate than expected, with the annual increase in employment figures falling from 4.6% to 4.5%. This does suggest that the underlying pressures driving inflation are still relatively low, and it is possible that further cuts may be on the cards later this year if these trends continue.
As the UK heads into 2026, expectations are that inflation will finally begin to fall off its downward trajectory, with some economists forecasting a return to around 2% by mid-year. Whether or not policymakers can manage to keep inflation in check ahead of this target remains to be seen, but for now, at least, it seems that the economy may be on the cusp of turning a corner.
The main drivers behind this increase were volatile items such as air fares and higher tobacco duties, which pushed up costs during the holiday period. However, despite these temporary spikes, inflation remains largely under control, with core inflation remaining flat at 3.2% - a rate that has been stable since November.
This news appears to be in contrast to the expectations of many City economists, who had forecast a modest rise in inflation to around 3.3%. Nevertheless, it does suggest that policymakers are taking a cautious approach, and may prefer to wait for further evidence before intervening in the economy.
The Bank of England's monetary policy committee is widely expected to keep interest rates at 3.75% when it meets in February, as they weigh up the latest data against their own economic forecasts. While most economists still anticipate a cut in April if inflationary pressures begin to ease over the coming months, this latest increase does add some uncertainty to the picture.
The Chancellor's pledge to tackle the cost of living remains firmly on track, with measures such as energy bill reductions and freezes to rail fares set to come into effect. While there is still much work to be done, it appears that progress is being made in addressing these pressing issues - and inflation may soon become a less dominant concern for policymakers.
However, wages are continuing to grow at a slower rate than expected, with the annual increase in employment figures falling from 4.6% to 4.5%. This does suggest that the underlying pressures driving inflation are still relatively low, and it is possible that further cuts may be on the cards later this year if these trends continue.
As the UK heads into 2026, expectations are that inflation will finally begin to fall off its downward trajectory, with some economists forecasting a return to around 2% by mid-year. Whether or not policymakers can manage to keep inflation in check ahead of this target remains to be seen, but for now, at least, it seems that the economy may be on the cusp of turning a corner.
i'm literally shaking my head over here... the fact that inflation is still holding steady despite all these volatile items and whatnot just blows my mind... like, 3.4%? that's not bad at all considering everything else going on 
but seriously, can't we just get some stability for once?! 
and i'm so over how predictable the Bank of England is... i mean, keeping interest rates steady next month is a given at this point, it's like they're stuck in neutral or something 
theyre not exactly things people can control, right? 
anyway, its good to see that inflation is still under control 
even if it does seem a bit unpredictable atm 
i mean, 3.4% is still pretty manageable compared to the likes of 6-7% or more we saw last year 
so lets not get too worked up about this one 
fingers crossed that wages keep growing at a decent rate and inflation starts to drop soon 
anyway, I think the Bank of England is being cautious 'cause they don't wanna mess with the economy too much 
and if wages are growing slower than expected, maybe they can just chill out a bit more on inflation cuts 
I feel like inflation is still a big worry for so many people out there. They're just trying to make ends meet and it's getting harder. The air fare spike was a shocker, can you imagine dealing with that? 
. plus wages r not even keeping pace with that. i think the gov's doing a good job with the cost of living pledge, but we need to see more action on wages and living costs overall 
, because that means there might be some wiggle room for further cuts later this year... and if inflation does start to fall, it could really make a difference in people's pockets 
Still, 3.4% inflation isn't terrible, and the Chancellor's doing something about energy bills & rail fares, so that's good news!