The latest data from the States of Guernsey’s data unit indicates a continued decrease in the island’s inflation rate, with the Retail Price Index (RPI) showing a drop to 3.4% for the 12 months ending December 2025. This marks a significant reduction from the previous year’s rate of 4.6% and a notable decline from the peak rate of 8.5% experienced in December 2022, which was the highest inflation level recorded since 1991.
Key Drivers Behind the Inflation Decline
The RPI reflects the cost of living by tracking the price changes of approximately 2,000 goods and services. The data highlights that fuel prices were the most significant contributor to inflation, with an increase of 6.3% over the past year, attributed primarily to rising kerosene costs. Additionally, the catering sector saw a price surge of 6%, while personal goods and services—including items like glasses and dental treatments—rose by 5.7%.
Housing-related costs also experienced a modest increase of 1%, mainly driven by higher mortgage payments. These figures underscore the ongoing pressures in specific sectors while indicating a broader trend of easing inflationary pressures across the island.
Fluctuations in Other Costs
Despite the overall decline in the inflation rate, some sectors experienced cost decreases. Notably, travel-related expenses, including fares, dropped by 2.7%, potentially reflecting seasonal pricing adjustments. However, taxi fares increased, suggesting that not all transport costs are following the same trend.
In terms of tobacco, prices remained stable in the final quarter of 2025, as adjustments to excise duties are anticipated early in the new year. Meanwhile, alcohol prices saw a slight uptick of 0.6% during the same period, although this was somewhat mitigated by seasonal discounts associated with Christmas.
Broader Economic Implications
These inflation figures are published quarterly and provide essential insights into the economic landscape of Guernsey. The substantial reduction in the inflation rate indicates a potential stabilisation of the local economy, which may benefit consumers as purchasing power gradually improves. However, the persistent price increases in key areas such as fuel and personal services highlight ongoing challenges that could affect household finances.
Why it Matters
The decline in Guernsey’s inflation rate is a critical development that may signal a shift towards greater economic stability on the island. As inflation eases, consumers may find relief in their cost of living, which could foster increased spending. Nevertheless, the enduring price pressures in essential sectors necessitate continued monitoring, as they could impact overall economic health and the well-being of residents. Understanding these trends is vital for policymakers and businesses as they navigate the complexities of the local economy in the coming months.
