UK's annual inflation rate rose more than expected in December, official data showed on Wednesday, strengthening expectations that the Bank of England will delay cutting interest rates next month.
The Consumer Prices Index (CPI) increased to 3.4 per cent in December from 3.2 per cent in November, the Office for National Statistics (ONS) said in a statement.
Analysts had forecast inflation at 3.3 per cent.
Price pressures are expected to ease in 2026, with inflation projected to move closer to the Bank of England’s two per cent target.
The ONS said the rise in December was driven by higher tobacco prices, airfares and food costs.
The inflation data, along with weak unemployment figures and some recent improvement in economic growth, will be used by the Bank of England to assess its next interest rate decision.
Data released on Tuesday showed unemployment stood at 5.1 per cent at the end of last year, close to a five-year high.
Wednesday’s inflation figure “makes it unlikely the Bank of England will cut interest rates from 3.75 per cent on 5 February,” said Paul Dales, chief UK economist at Capital Economics.
“Our forecast is that CPI inflation fell back in January and, more importantly, that it will plunge all the way to the 2.0 per cent target in April,” he added.
