Inflation in the UK rose for the first time in five months to 3.4% in December, driven by higher air fares and tobacco prices, according to the Office for National Statistics (ONS). The annual rate increased from 3.2% in November, exceeding City economists' forecasts of 3.3%.
The rise was largely due to volatile items: air fares jumped 28.6% over Christmas, compared with a low base in 2024, while higher tobacco duties from Chancellor Rachel Reeves' autumn budget took effect. Core inflation, excluding energy and food, held steady at 3.2%.
Analysts consider the uptick temporary, but it has all but ruled out a Bank of England interest rate cut in February. Markets now expect the first cut in June, though some economists predict April if price pressures ease.
Food inflation rose to 4.5% from 4.2%, driven by breads and cereals. Services inflation edged up to 4.5% from 4.4%, a smaller rise than expected, partly due to air fares.
Separate ONS data showed private rental prices rose 4% annually in December, the slowest pace since May 2022, as demand fell and more homes became available.
