The inflation rate in the United Kingdom rose to an annualized rate of 3.4% in December, above economists’ consensus forecast of 3.3%.
The inflation rate in the U.K. had steadily fallen to 3.2% over the last 12 months before suddenly rising in December.
According to Britain’s Office for National Statistics, core inflation that excludes energy, food, alcohol, and tobacco, stood at 3.2% in December, unchanged from November.
Contributing to the December rise in consumer prices were higher tobacco costs, as well as higher airfare tickets and rising expenses for food bought at grocery stores.
The increases were partially offset by declines in rent and lower prices for recreational and cultural events.
Declining inflation for most of 2025 had led the Bank of England to cut interest rates at its final meeting of the year in December.
The Bank of England had expected inflation to rise slightly at the end of 2025 before cooling this spring and summer and dropping back towards the central bank’s 2% annualized target.
Separate data shows that employment in the U.K. continues to soften amid a general malaise in the British labour market.
Financial markets are currently placing the odds that the Bank of England will further cut interest rates at its next meeting in February at 50-50.
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