UK inflation rose to 3.4 percent in December, marking its first increase in five months, according to official figures. The rise was slightly higher than expected and caught some economists by surprise.
Despite the increase, analysts say this does not point to a lasting inflation problem. The Bank ended last year by cutting interest rates to 3.75 percent, but experts think another cut is unlikely this month.
He expects interest rates to come down gradually later this year but said inflation and wage growth remain too high for quick action.
The Office for National Statistics reported that airfares were one of the biggest contributors to December’s inflation. This was largely due to the timing of return flights over Christmas and New Year, which tend to be more expensive.
Tobacco prices also climbed sharply following duty increases announced in late November. At the same time, food prices continued to rise, especially for bread, cereals, and vegetables. Overall, food and non alcoholic drink prices increased by 4.5 percent over the year.
Industry leaders said rising costs and low consumer confidence meant households spent less over Christmas. This resulted in weaker sales across the food and drink sector.
There were some signs of easing pressure. Inflation linked to housing and household services, including rents, slowed to 4.9 percent in December, down from 5.1 percent the previous month.
Transport prices rose by 4 percent over the year, again driven mainly by flight costs. Analysts explained that seasonal timing can have a strong effect on airfare data, especially around major holidays.
Compared with nearby European countries, UK inflation remains higher. Germany recorded inflation of 2 percent in December, while France saw a much lower rate of 0.7 percent.
Looking ahead, economists expect inflation to fall sharply in January. Deutsche Bank economist Sanjay Raja said the Bank of England’s 2 percent target could come into view by spring, with the UK likely to see one of the largest inflation drops among major economies this year.
