UK inflation rises for first time in five months - but one-off factors blamed
UK Inflation Edges Up for First Time in Five Months
Official estimates indicate that higher tobacco prices and airfares pushed the UK’s rate of inflation higher in December—the first increase in five months. The headline rate rose to 3.4%, which was higher than anticipated, as most economists had predicted a more modest increase.
However, analysts do not believe this signals a long-term upward trend. They point to "one-off" factors, including the cost of Christmas flights and the tobacco tax hike announced in the recent Budget. The figures arrive just before the Bank of England’s first meeting of 2026 to decide on interest rates; in 2025, the Bank lowered the cost of borrowing to 3.75%.
"Erratic Factors"
The rise from November’s 3.3% was slightly above market expectations. Michael Saunders, a former member of the Bank of England’s Monetary Policy Committee, noted that the increase "is not the start of a new upward trend; it reflects a multitude of somewhat temporary, erratic factors."
He suggested that while a rate cut in February is unlikely, the Bank still hopes to announce gradual reductions later this year. "The reason they cannot cut quickly is because inflation and wage increases are still too high for comfort," he added.
Key Drivers: Travel and Tobacco
The Office for National Statistics (ONS) identified several primary contributors to the December rise:
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Airfares: Prices rose significantly due to the specific timing of return flights over the Christmas and New Year period.
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Tobacco: Prices jumped following the duty increases announced in the Budget on 26 November.
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Food: Costs for bread, cereals, and vegetables also contributed to the upward pressure.
Grant Fitzner, the ONS Chief Economist, noted that while food prices are still rising, some areas showed signs of cooling. Rent inflation, for instance, slowed to 4.9% in the 12 months to December, down from 5.1% in November.
Political Reaction
Chancellor Rachel Reeves responded to the figures by emphasizing that the government's priority remains lowering the cost of living. She highlighted Budget measures such as the freeze on rail fares and prescription fees. "There is more to do," she said, "but this is the year Britain turns a corner."
In contrast, Shadow Chancellor Mel Stride blamed the rise on "economic mismanagement," stating: "A record-high tax burden and irresponsible borrowing are stifling growth and fuelling inflation."
Global Comparisons
The UK's inflation rate remains higher than that of its European neighbours. In Germany, inflation stood at 2.4% in the year to December, while France saw a rate of just 0.7%.
Despite this, Sanjay Raja, Chief UK Economist at Deutsche Bank, remains optimistic. He predicts that UK inflation will "take a big step down in January," with the Bank of England’s 2% target coming into sight by the spring. "In fact, we expect the UK to see the largest drop in headline inflation of any G7 nation this year," he concluded.
