The UK inflation rate rose by more than anticipated in December driven by increases in air fares and tobacco prices.
The latest figures released this morning from the Office for National Statistics (ONS) revealed inflation for the year to December rose to 3.4%, up from 3.2% for the year to November.
The rise exceeded expert predictions who had forecast a more modest increase to 3.3%.
It represents, The Times reports, the first jump in the cost of living since June 2025 and keeps the rate of inflation well above the Bank of England’s target of 2%.
Reacting to the figures, chancellor Rachel Reeves said: “My number one focus is to cut the cost of living.
"At the budget I announced £150 off energy bills, a freeze to rail fares for the first time in 30 years, a freeze to prescription charges for the second year running, and an increase to the national minimum and living wage.
"Money off bills and into the pockets of working people is my choice. There’s more to do, but this is the year that Britain turns a corner.”
Grant Fitzner, chief economist at the ONS, said: “Inflation ticked up a little in December, driven partly by higher tobacco prices, following recently-introduced excise duty increases.
"Airfares also contributed to the increase, with prices rising more than a year ago, likely because of the timing of return flights over the Christmas and New Year period.
"Rising food costs, particularly for bread and cereals, were also an upward driver.
“These were partially offset by a fall in rent inflation and lower prices for a range of recreational and cultural purchases.
"The annual increase in the prices for goods leaving factories was unchanged this month, while the increase in the cost of raw materials for business slowed, driven by lower crude oil prices.”
Stuart Morrison, research manager at the British Chambers of Commerce, said: “Today’s data is a stark reminder that the UK inflation waters remain choppy.
“With CPI rising to 3.4% in December, it’s clear the path to hitting the Bank of England’s 2% target will have further twists and turns. Hopes of another interest rate cut at the start of February now look very unlikely.
“Our latest survey shows inflation remains a key concern for businesses cited by 56% of respondents. The threat of more US tariffs in the coming weeks will only increase price concerns among the firms we represent.
“Business confidence remains weak, and the Budget was a missed opportunity to turbocharge the economy. As firms look ahead to uncertain 2026, they need the Government to deliver on growth. That means action to boost investment, transform productivity and support trade.”
FTSE100
The UK's flagship share index, the FTSE 100, was up 8 points at 10,123 shortly after opening this morning.
Brent crude oil futures were down 0.05% at $63.91 a barrel.
Companies reporting
- Burberry - Q3 Trading Statement
- Currys - Trading Statement
- Experian* - Q3 Trading Statement
- Hochschild Mining - Q4 Production Results
- J D Wetherspoon* - Q2 Trading Statement
- JD Sports Fashion* - Q4 Trading Statement
- Premier Foods - Q3 Trading Statement
- Rio Tinto - Full Year Operations Review