The Office for National Statistics has reported that the UK’s rate of inflation rose to 3.4% in December, marking the first increase in five months. This latest data suggests the cost of living is continuing to squeeze British households.
The Consumer Prices Index (CPI), the primary measure of inflation, had been falling since reaching a peak of 3.6% in October. However, the latest figures show a reversal of that trend, with prices climbing once more at the end of 2022.
“After several months of slowing, inflation has ticked up again, highlighting the persistent pressures on household budgets,” said Jack Sirett, head of dealing at Ebury, a foreign exchange firm. “The rise was driven by increases in the cost of food, drink and household goods.”
The data also showed that the Retail Prices Index (RPI), a broader measure of inflation, rose to 5.5% in December, up from 5.2% the previous month.
The Bank of England has been working to bring down inflation, which remains well above its 2% target, through a series of interest rate hikes. The central bank raised rates by 0.5 percentage points in December, taking the base rate to 3.5%.
“The Bank of England will be closely watching these figures as it considers its next move on interest rates,” said Myron Jobson, senior personal finance analyst at Interactive Investor. “Further rate rises are likely on the cards as the Bank seeks to rein in stubbornly high inflation.”
The rise in inflation comes as households continue to grapple with the cost-of-living crisis, with energy bills, food prices and other essential costs remaining elevated. This is putting a significant strain on family budgets, with many people forced to make difficult choices about their spending.
“These figures will add to the growing pressure on households, who are already facing a tough economic environment,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. “The cost-of-living crisis is far from over, and the Bank of England will need to strike a delicate balance as it tries to cool inflation without tipping the economy into recession.”
Looking ahead, economists will be closely monitoring the trajectory of inflation in the coming months, as the UK navigates a challenging economic landscape.
