Economists are predicting that the steady decline in the UK's cost of living was temporarily interrupted in December, with inflation expected to have ticked higher due to festive travel demand and tax changes.
Forecasted Rise in CPI
Several analysts anticipate that the rate of Consumer Prices Index (CPI) inflation rose last month after a sharp fall in November. Rob Wood and Elliott Jordan-Doak, economists at Pantheon Macroeconomics, forecast CPI to have increased to 3.3% in December, up from 3.2% the previous month. A key driver is the hike to tobacco duties announced in the November autumn budget, which pushed up overall prices.
Impact of Festive Getaways
The surge in demand for Christmas travel is also believed to have significantly contributed to price pressures. Analysts suggest that airfares could have jumped by around 30% between November and December, with hotel prices also soaring. However, economists note that the exact inflation figure is highly sensitive to the date the Office for National Statistics (ONS) collected its data, as prices peaked during the school holidays.
Andrew Goodwin, chief UK economist at Oxford Economics, stated that the slowdown in the rising cost of living was "temporarily halted" in December. He pointed to a likely reversal of November's falls in volatile categories like clothing, airfares, and accommodation. Goodwin is predicting a sharper rise, with CPI inflation hitting 3.6% for the month.
Diverging Views and Long-Term Outlook
Not all institutions agree with this upward assessment. Analysts at Barclays, for instance, believe inflation remained unchanged at 3.2% in December, citing a slowdown in energy price inflation and steadier food and drink costs.
Despite the potential December blip, experts broadly agree that the underlying trend for inflation in 2026 is still downwards. Victoria Scholar, head of investment at Interactive Investor, emphasised this view: "Longer term, the trajectory for inflation is still on the downside, heading back towards the 2% target later this year." She cited the disinflationary impact of November's budget, which included tax rises and spending cuts, alongside growing slack in the labour market as factors that will continue to ease price pressures.
