UK CPI December 2025 Preview: Slight Uptick Expected

Inflation by the End of 2025 Edges Higher

Market consensus indicates the UK CPI to post a slight increase to 3.3% year, on, year for December 2025, which is by 0.1% more than November's figure. Core inflation is also set to rise a bit from 3.2%. This is after November's deceleration from October's 3.6%, with monthly CPI at, 0.2% and RPI at 3.8%. The main factors of raising prices are still the energy base effects that persist and food inflation that remains at a high level (4.2% compared to the peak in October of 4.9%). On the other hand, the price of food that has eased, deflation in clothing, and the costs of tobacco going down are the factors that pull the economy in the opposite direction.

Path to Target: Downward Trend Anticipated in 2026

Some economists predict inflation to be at an average of around 3.5% in Q4 2025, then to plunge substantially to 2.2% in Q4 2026. The majority expect the headline CPI to be back at the Bank of England's 2% target level in the first half of 2026, with help from the disappearance of effects from the tax changes in the Budget of October 2025. The more comprehensive forecast suggests a continual decrease through 2026 with the possibility of hitting the target in late 2026 or early 2027, though factors such as potential US, UK trade tensions and tariffs may make the path more complicated.

BoE Caution Persists Amid Rate Cut Speculation

With the Bank Rate unchanged at 3.75% following the four 2025 cuts, the BoE maintains its cautious stance. No rate reduction is in sight as the market seems to agree.