Consumer Prices Index CPI Inflation Rising Faster Again

The Office for National Statistics (ONS) has this morning released UK inflation figures for December 2025.

Inflation fell in October and November to 3.2% pa, having been frozen for three months (July, August, September) at 3.8% pa.  Hopes were riding high until this morning, with inflation now climbing again by 0.2% to 3.4% pa.

No doubt the government will claim that this was a ‘blip’ increase in the battle to reach trend inflation at 2.0% pa due to seasonal price increases on flights, food, wine etc as well as Budget increases for tobacco.  Smoke and mirrors we suggest, the energy price cap has gone up, only 10% of the UK population now smoke and the reality is that every single sector monitored by the ONS ‘day to day’ necessities such as education, alcohol, housing costs, transport, food and non-alcoholic beverages that are still increasing at rates of 4.0% pa to 7.6% pa.  At least double and in most cases, 2.5 to 3 X the Bank of England’s 2% pa target.

­Falls in Price Rise Increase Rate

• Furniture and household goods down by -0.6%.
• Health going down to a 2.1% increase.
• Recreation and culture down slightly to a 2.7% increase.
• Communication down slightly to a 4.2% increase.
• Housing and household services down slightly to a 4.9% increase.

Rises in Prices Increase Rate

• Alcohol and tobacco up 5.2%.
• Food and non-alcoholic beverages up 4.5%.
• Transport up 4.0%.
• Restaurants and hotels up 3.8%.
• Miscellaneous goods and services up 2.2%.
• Clothing and footwear increased back to where they were 12 months with prices up to 0.0%, an increase from last month’s negative of -0.6%.

Price Rises Remained Level

• Education price increase remained level at 7.6%.  Yes, that’s a staggering increase that is holding and not falling.

RPI Increased 0.4% pa to 4.2% pa

The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI) and still our preferred measure of real inflation went back up to 4.2% pa, wiping out last month’s fall of 0.5% pa.

Comment

The bottom line is virtually all prices are still increasing yet again above the Bank of England’s sustainability target of 2.0%, even clothing and footwear where prices were down overall in 12 months in November, are going back up again with prices now back up to where they were in December 2024.  Only Furniture and household goods prices have fallen in the last 12 months, and only just by 0.6% and that’s because nobody can afford to buy household goods and furniture.

The country is fast becoming a mess, unemployment still rising at over 5%, an additional 1.5m benefits claimants that are not required to seek work since Labour took power, even higher illegal immigration than under the Conservatives, taxation as its highest as % of GDP since World War II, businesses are about to get smashed with huge business rate increases on top of last year’s huge minimum wage increases and employer national insurance contributions increases.  Add to this, workers will soon be able to go sick and get statutory sick pay (paid by the employer) on day 1 and not day 4.

No wonder there is not enough money available to spend on defence to bolster the UK in these difficult times leaving us ‘wide open’ given the pressure on businesses that is then being passed on to the consumer.  Don’t expect an interest rate cut on 5^th February.

Key dates for us all:

• 28 January 2026: Next Federal Reserve FOMC interest rate decision.
• 05 February 2026: Next Bank of England MPC interest rate decision.
• 05 February 2026: Next European Central Bank interest rate decision.
• 18 February 2026: Next ONS inflation report.