Inflation bounces back in December as Christmas travel fuels price rises
UK inflation bounced back in December as tobacco duty hikes and Christmas getaways helped push up the cost of living, official figures show.
The rate of Consumer Prices Index (CPI) inflation rose to 3.4% in December from 3.2% in November, the Office for National Statistics (ONS) said. It marks the first time in five months that the headline rate has risen. Inflation has been static or falling since last summer, and had fallen sharply in November following an easing of rising food costs. However, December’s CPI rate comes in slightly below the 3.5% that a consensus of economists had been forecasting for the month. The ONS said alcohol and tobacco prices rose by 1% between November and December, following a hike to tobacco duties which was announced at the autumn budget. Increased transport costs was also a major driver of the inflation rise, with prices up by 1.3% on a monthly basis. The largest push came from air fares, which soared by 28.6% in December thanks to increased demand for travel over the festive period and school holidays fuelling price hikes. Furthermore, food and non-alcoholic drink prices rose by 0.8% between November and December – with items like bread, cereals and vegetables, including potatoes, helping push up overall costs. The annual inflation rate for the division increased to 4.5% from 4.2% the previous month. ONS chief economist Grant Fitzner said: “Inflation ticked up a little in December, driven partly by higher tobacco prices, following recently introduced excise duty increases. “Air fares also contributed to the increase with prices rising more than a year ago, likely because of the timing of return flights over the Christmas and new year period. “Rising food costs, particularly for bread and cereals, were also an upward driver. “These were partially offset by a fall in rents inflation and lower prices for a range of recreational and cultural purchases.” Chancellor Rachel Reeves pledged that 2026 would be the “year that Britain turns a corner” following the latest release of data. “My number one focus is to cut the cost of living,” she said. “At the budget I announced £150 off energy bills, a freeze to rail fares for the first time in 30 years, a freeze to prescription charges for the second year running, and an increase to the national minimum and living wage. “Money off bills and into the pockets of working people is my choice. There’s more to do, but this is the year that Britain turns a corner.” Shadow chancellor Sir Mel Stride said inflation rose “because of Labour’s economic mismanagement – pushing up the cost of living and punishing the most vulnerable”. “A record-high tax burden and irresponsible borrowing are stifling growth and fuelling inflation – leaving working people worse off,” he said. Experts said that December’s rise was likely to be a “temporary blip” following several months of easing inflation. Charlotte Kennedy, chartered financial planner for Rathbones, said inflation was on a “broadly downward but bumpy trajectory”, adding: “The recent rise is likely to be a temporary blip following several months of easing inflation since September.” Thomas Pugh, chief economist at RSM UK, said he was expecting inflation to “take a step down to 3% in January, before dropping to around 2% in the second quarter” of 2026 “as measures announced in the last budget to lower energy prices take effect”. But he said the Bank of England was likely to stay cautious when it comes to reducing interest rates, with a potential cut in April that “may well be the last one this year”. Most economists think the latest inflation data has cemented expectations that the Bank will choose to keep interest rates on hold next month. Meanwhile, the ONS’s preferred measure of inflation, Consumer Prices Index including occupiers’ housing (CPIH), rose to 3.6% in December, from 3.5% in November. The Retail Prices Index (RPI) rate of inflation rose to 4.2% from 3.8% in November.
Published: by Radio NewsHub
