Inflation in Britain accelerated more than expected in December, indicating continued price pressures despite a slowdown in economic activity, according to official data released Wednesday by the Office for National Statistics.
The data showed that annual consumer price inflation rose to 3.4% compared to 3.2% in November, exceeding the average forecast in a Reuters poll which predicted 3.3% .
In contrast, inflation in the services sector – which is closely watched by the Bank of England to gauge domestic price pressures – came in at 4.5% , compared to 4.4% in the previous month, in line with analysts' expectations.
Although Britain still has the highest inflation rate among the G7 countries, forecasts indicate a sharp slowdown in the pace of price increases in the coming months, with increases in energy costs and government fees being removed from the annual comparison.
In this context, Bank of England Governor Andrew Bailey stated that inflation could approach the bank's 2% target by next April or May, which strengthens bets on the start of a monetary easing cycle this year.
The pound showed no significant reaction following the release of the data, while economists attributed the recent price increase to rising costs of tobacco products and airline tickets .
Financial markets expect the Bank of England to cut interest rates once or twice during 2026 , after it lowered the rate in December to 3.75% , amid a split within the Monetary Policy Committee over the risks of continued inflation.
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