Inflation in the UK Exceeded Market Expectations

UK Inflation Figures Back on the Agenda

The Office for National Statistics (ONS) has released Consumer Price Index (CPI) data for December 2025. According to the data, annual inflation, which was 3.2% in November 2025, rose to 3.4% in December 2025. This increase has surpassed the market analysts' expectations of 3.3%.

Monthly Inflation and Sectoral Impacts

In December 2025, the inflation rate measured on a monthly basis was 0.4%. This increase was notably driven by the alcohol and tobacco products and the transportation sector. The upward movement in prices for alcohol and tobacco products has placed pressure on overall inflation.

Core and Services Inflation Figures

Another important component of the inflation data is core inflation, which is calculated excluding energy and food prices. In December 2025, the annual core inflation rate was calculated to be 3.2%, while services inflation stands at 4.4%. Analysts had estimated 3.3% and 4.6% for core and services inflation respectively.

Bank of England's Targets

The Bank of England aims to reduce the inflation rate to 2% in order to minimize inflation risks in the economy. However, recent data suggests that achieving this target may be difficult. Rising energy costs and increasing demand particularly complicate the effort to control inflation.