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Chancellor Rachel Reeves insisted the UK economy was on course to recover despite a rise in inflation which dimmed hopes of an early interest rate cut.\u00a0<\/p>\n
Prices grew 3.4% in the 12 months to December, the first increase in five months. Airfares, tobacco and basic food products, such as bread and cereal, contributed to the uplift from November\u2019s figure of 3.2%, as measured by the consumer prices index.<\/p>\n
Analysts believe persistent inflation will push back a rate cut to later in the year.<\/p>\n
However, the Chancellor remained optimistic. \u201cMy number one focus is to cut the cost of living. At the budget I announced \u00a3150 off energy bills, a freeze to rail fares for the first time in 30 years, a freeze to prescription charges for the second year running, and an increase to the national minimum and living wage. <\/p>\n
\u201cMoney off bills and into the pockets of working people is my choice. There\u2019s more to do, but this is the year that Britain turns a corner.\u201d<\/p>\n
Stuart Morrison,\u00a0research manager at the British Chambers of Commerce said:\u00a0 \u201cToday\u2019s data is a stark reminder\u00a0that the UK inflation waters\u00a0remain\u00a0choppy.\u00a0\u00a0<\/p>\n
\u201cWith CPI rising to 3.4% in December,\u00a0it\u2019s\u00a0clear the path to hitting the Bank of England\u2019s 2% target will have further twists and turns. Hopes of\u00a0another interest rate cut at the start of February\u00a0now\u00a0look\u00a0very\u00a0unlikely.\u00a0<\/p>\n
\u201cOur latest survey\u00a0shows\u00a0inflation\u00a0remains\u00a0a key concern\u00a0for businesses\u00a0cited\u00a0by 56%\u00a0of respondents.\u00a0The threat of\u00a0more\u00a0US tariffs\u00a0in the coming weeks\u00a0will only increase price concerns among the firms we represent.\u00a0\u00a0<\/p>\n
\u201cBusiness confidence\u00a0remains\u00a0weak, and the Budget was a missed opportunity to turbocharge\u00a0the economy.\u00a0As firms look ahead to uncertain 2026, they need\u00a0the\u00a0Government to deliver\u00a0on growth.\u00a0That means action to boost investment, transform productivity and support trade.\u201d\u00a0<\/p>\n
Martin Sartorius, lead economist at the CBI, said: \u201cInflation edged up slightly in December, broadly in line with consensus expectations. However, we anticipate that this increase will prove to be temporary. <\/p>\n
\u201cPrice pressures are set to ease noticeably this year, particularly as the impact of last year\u2019s energy and utility price hikes fades away.<\/p>\n
\u201cWe expect the Bank of England\u2019s Monetary Policy Committee to cut rates again early this year, if inflation slows as anticipated.\u201d<\/p>\n
Alice Haine, personal finance analyst at investment platform\u00a0Bestinvest by Evelyn Partners, said: \u201cThe\u00a0December\u00a0uptick\u00a0is expected to be\u00a0short-lived,\u00a0with the slowdown in\u00a0price\u00a0pressures\u00a0seen in the final few months of 2025\u00a0set to\u00a0resume\u00a0this year. <\/p>\n
\u201cEncouragingly, underlying inflationary pressures\u00a0are continuing\u00a0to ease. Core inflation, which strips out more\u00a0volatile items such as food, alcohol and tobacco,\u00a0held steady at 3.2%\u00a0in December from 3.2% in November,\u00a0though\u00a0services inflation\u00a0edged up\u00a0to\u00a04.5%\u00a0from 4.4%, signalling a broader\u00a0cooling in\u00a0domestically driven price pressures.\u00a0<\/p>\n
\u201cThe Bank of England believes\u00a0inflation has already\u00a0peaked,\u00a0with the headline figure expected to\u00a0ease back\u00a0towards\u00a0its 2% target\u00a0by the end\u00a0of this year.<\/p>\n
\u201cLower inflation,\u00a0coupled\u00a0with\u00a0unemployment\u00a0at a five-year high 56.1% and easing wage growth are likely to pave\u00a0the\u00a0way for\u00a0further interest-rate cuts\u00a0in 2026.\u00a0<\/p>\n
\u201cHowever, that relief\u00a0might not happen as soon as\u00a0households would like. Financial markets currently view\u00a0a\u00a0Spring rate\u00a0cut\u00a0more likely than a\u00a0move\u00a0at the Monetary Policy Committee\u2019s next meeting in early February.\u201d<\/p>\n
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