Inflation in Britain rose for the first time in five months to 3.4% in December, according to official figures, suggesting the Bank of England will abandon a rate change next month.
The Office for National Statistics said annual inflation, as measured by the consumer price index (CPI), rose from 3.2% in November, after falling in October and leveling off in the previous three months. The figure exceeded city economists’ expectations of a modest increase to 3.3%.
The rise in inflation suggests the Bank of England’s rate-setting committee will keep rates at 3.75% at its February meeting. However, most economists now expect a cut in April if price increases in Britain decline in coming months.
Despite the increase, inflation is expected to decline overall in 2026, following a downward trend since September’s 3.8%. The Bank of England expects inflation to approach its 2% target by the middle of this year.
The chancellor, Rachel Reeves, has made tackling the cost of living a key target of November’s autumn budget, alongside £26 billion in tax rises to help repair the public finances and fund the lifting of the two-child cap.
The Bank has said it expects its measures, including relief on utility bills, prescription fees and fuel taxes, to reduce overall inflation this year.
The employment figures published on Tuesday also indicate that inflationary pressures on the UK economy are easing, with wage growth slowing to 4.5% in the three months to November, compared with 4.6% in the three months to October.
More details coming soon…
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