Consumer price index (CPI) inflation increased by 3.4% in the 12 months to December, rising from 3.2% in November, the Office for National Statistics (ONS) has revealed.

The latest data comes after November's inflation growth was the slowest increase since March.

Month-on-month, inflation increased by 0.4%, after rising by 0.3% in December 2024.

The ONS stated that the latest increase in CPI inflation was driven by higher alcohol prices and a rise in tobacco duties announced in the Autumn Budget, as well as strong demand for air travel around the festive period.

Personal finance analyst at Bestinvest, Alice Haine, said that the recent uptick in inflation is expected to be short-lived, with the slowdown in price pressures seen in the final few months of 2025 set to resume in 2026.

She added: The combination of tax rises and spending restraints introduced in the Autumn Budget, along with a cooling labour market and slowing wage growth, are likely to act as a drag on prices.

"Encouragingly, underlying inflationary pressures are continuing to ease. Core inflation, which strips out more volatile items such as food, alcohol and tobacco, held steady at 3.2% in December from 3.2% in November, though services inflation edged up to 4.5% from 4.4%, signalling a broader cooling in domestically driven price pressures."

However, director of retail banking at LHV Bank, Kris Brewster, added that the latest inflation data may lead to more anxiety around the state of the country’s economy.

He concluded: "This rise in CPI inflation to 3.4% will worry many people and raises fresh questions about the Bank of England’s grip on the economy. After repeated signals that price growth was coming under control, this move shows how uncertain the position still is, especially as services costs remain high.

"After missing its target for well over a year, it is hard to argue that the Bank has inflation firmly under control. Each setback adds more pressure on households who are already struggling with high bills and wages that are not keeping pace.

"In this environment, people cannot rely on the wider economy to protect their spending power. Making active choices matters. Using savings and current accounts that still reward loyalty, and shopping around for better rates, helps money work harder and can soften the impact of rising costs."

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