EuroWire, LONDON: UK inflation rose for the first time in five months in December, with consumer prices increasing 3.4% in the year to December 2025, up from 3.2% in November, according to the Office for National Statistics. On a month-on-month basis, CPI rose 0.4% in December, compared with a 0.3% rise in December 2024, indicating renewed near-term price pressure as households headed into the year-end period.
A broader measure that includes owner occupiers’ housing costs, CPIH, rose 3.6% over the year, up from 3.5% in November, the ONS said. The data kept inflation well above the Bank of England’s 2% target, as policymakers weigh the balance between easing price growth and supporting an economy that has shown signs of strain after two years of restrictive monetary policy.
The ONS said the largest upward contributions to the change in the annual rate came from transport and from food and non-alcoholic beverages. Transport prices rose 4.0% over the year to December, up from 3.7% in November, with air fares among the components that pushed the annual rate higher. Food and non-alcoholic beverage inflation climbed to 4.5% from 4.2%, with prices rising 0.8% on the month.
Within transport, motor fuel inflation remained modest but positive, with average diesel prices rising 1.9 pence per litre in December to 145.7 pence per litre, compared with 142.6 pence a year earlier. Overall motor fuel prices rose 0.9% in the year to December, little changed from November, the ONS said, while higher travel-related costs around the holiday period helped lift the division’s annual rate.
Inflation details show mixed underlying pressures
Core CPI, which excludes energy, food, alcohol and tobacco, rose 3.2% in the year to December, unchanged from November, suggesting that the headline increase was not accompanied by a broad-based acceleration in underlying inflation. The split between goods and services showed a continued gap, with the CPI goods annual rate edging up to 2.2% from 2.1%, while the CPI services annual rate increased to 4.5% from 4.4%.
Services inflation is closely watched by the Bank of England because it can reflect domestic cost pressures, including wages and rents. The persistence of a higher services rate alongside a relatively lower goods rate underscores the uneven path back toward target, even as some price categories have cooled markedly from their peaks following the energy shock and post-pandemic supply disruptions.
Alcohol and tobacco were also cited as upward factors in the December print, consistent with tax-driven and seasonal movements that can influence month-to-month changes in the inflation basket. The ONS report noted that the annual rate rose for the first time since July 2025, ending a run of declines that had eased pressure on households through the autumn.
Bank of England rate setting remains in focus
The inflation data comes after the Bank of England reduced Bank Rate by 0.25 percentage points to 3.75% at its meeting ending 17 December 2025, following a narrow vote among policymakers. The central bank’s next scheduled rate decision is due on 5 February 2026, with markets and borrowers focused on how quickly inflation returns toward target and how that feeds into the outlook for interest rates.
For households, the December figures highlight that the cost of everyday essentials and travel remains a key driver of the inflation experience, even as some categories have moderated. With food inflation at 4.5% and services inflation at 4.5%, the latest readings show that price growth is no longer dominated by energy alone, but by a mix of sectors that can affect budgets through grocery bills, transport costs and service charges.