FX.co ★ UK Inflation Ticks Higher in December

In December 2025, UK consumer price inflation rose to 3.4%, a slight increase from November's eight-month low of 3.2%, and surpassed market forecasts of 3.3%. This year-end rise in inflation could pose challenges to the Bank of England as it seeks to guide inflation back to its 2% target. The uptick was largely attributed to quicker price increases in the categories of alcohol and tobacco, which climbed to 5.2% from 4.0% in November, and transportation, which rose to 4.0% from 3.7%. Additional inflationary pressures were observed in food and non-alcoholic beverages, where prices increased to 4.5% from 4.2%, as well as in restaurants and hotels (3.8% compared to 3.5%), and miscellaneous goods and services (up to 2.2% from 2.1%). Services inflation, an important indicator for the Bank of England in assessing domestic price trends, slightly increased to 4.5% from 4.4%, which was less than anticipated. On the other hand, core inflation, excluding volatile elements like unprocessed food and energy, remained stable at 3.2%, maintaining its lowest level since December 2024.