EuroWire, LONDON: UK inflation rose in December, a rebound that keeps consumer price growth above the Bank of England’s 2% target as policymakers prepare for their next interest rate decision. Official data showed the Consumer Prices Index increased 3.4% in the year to December 2025, up from 3.2% in November, the first rise since July 2025. The Bank of England’s current Bank Rate is 3.75%, with the next policy announcement due on Feb. 5.
The Office for National Statistics said prices rose 0.4% month on month in December, compared with 0.3% in December 2024. Its broader CPIH measure, which includes owner occupiers’ housing costs, rose 3.6% over 12 months, up from 3.5% in November. Core CPIH, excluding energy, food, alcohol and tobacco, was unchanged at 3.5%, while CPIH services inflation held at 4.5%.
The December increase was driven by a mix of categories, with alcohol and tobacco and transport making the largest upward contributions to the monthly change in both CPIH and CPI annual rates. Within CPIH, alcohol and tobacco inflation rose to 5.2% from 4.0%, while transport increased to 4.0% from 3.7%. Food and non-alcoholic beverages rose to 4.5% from 4.2%, and restaurants and hotels rose to 3.8% from 3.5%.
In its December meeting, the Bank of England’s Monetary Policy Committee voted 5 to 4 to cut Bank Rate by a quarter point to 3.75%, with four members preferring to hold at 4%. The committee said monetary policy is set to ensure CPI inflation settles sustainably at 2% in the medium term. It added that the extent of further easing will depend on the outlook for inflation and noted Bank Rate has been reduced by 150 basis points since August 2024.
Policy guidance after the December cut
The central bank said in December that evidence pointed to subdued economic growth and building slack in the labour market, and that pay growth and services price inflation had continued to ease. The latest inflation data show services inflation in the CPIH measure remained at 4.5% in December, while the all-goods annual rate rose to 2.2% from 2.1%. The ONS said housing and household services remained the largest contributor to annual inflation in both CPIH and CPI.
Bank Rate is the benchmark for borrowing and saving costs across the economy, influencing rates on loans, mortgages and deposits. The Bank of England publishes its policy summary and minutes alongside quarterly Monetary Policy Reports at selected meetings, setting out its assessment of inflation and activity as it calibrates policy. The February announcement is scheduled to include a Monetary Policy Report, according to the central bank’s published timetable.
Upcoming data and methodology changes
The next monthly inflation release is scheduled for Feb. 18 at 7 a.m., covering January 2026. Separately, the ONS has said it will introduce supermarket scanner data into consumer price inflation statistics from February 2026, affecting figures published from March, as part of its transformation of price collection. Scanner data are collected at the point of sale in-store or online and allow prices and quantities for all products sold by participating retailers to be used rather than a smaller manual sample.
Beyond February, the Bank of England has confirmed further policy announcement dates including March 19 and June 18, with additional Monetary Policy Reports due in April, July and November. With CPI inflation above target and the December rise adding to recent month-to-month fluctuations, the policy committee has said its decisions will be guided by how the inflation outlook evolves and by evidence on domestic price pressures, including services inflation and broader measures of underlying inflation.