UK inflation firmed at the end of 2025, with headline pressure coming in slightly hotter than expected. CPI rose to 3.4% yoy in December, up from 3.2% and above expectations of 3.3%, while prices increased 0.4% mom, pointing to ongoing near-term inflation momentum.
The upside in headline inflation, however, masked relative stability in underlying pressures. Core CPI—excluding energy, food, alcohol and tobacco—was unchanged at 3.2% yoy, undershooting expectations of 3.3%, and marking the joint-lowest reading since December 2024. Core inflation was last lower in September 2021, reinforcing the view that underlying disinflation progress, while slow, remains intact.
By component, services inflation edged up to 4.5% yoy from 4.4%, keeping the sector firmly in focus for the BoE, while goods inflation rose to 2.2% from 2.1%.
