Inflation rises to 3.4% with Bank of England’s “2% target now a pipe dream”(Image: inyourArea)
Inflation rose from 3.2% to 3.4% in the UK in December in the first increase in six months as experts warned the Bank of England’s “2% target is now a pipe dream”.
The Consumer Prices Index (CPI) rose by 3.4% in the 12 months to December 2025, up from 3.2% in the 12 months to November, Office for National Statistics data revealed.
On a monthly basis, CPI rose by 0.4% in December 2025, compared with a rise of 0.3% in December 2024.
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Alcohol and tobacco, and transport made the largest upward contributions to the monthly change in both CPIH and CPI annual rates.
Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.2% in the 12 months to December 2025, the same rate as the 12 months to November.
The CPI goods annual rate rose from 2.1% to 2.2%, while the CPI services annual rate rose from 4.4% to 4.5%.
Speaking to Newspage, Ben Perks, Managing Director at Stourbridge-based Orchard Financial Advisers, said the Bank of England’s 2% inflation target is looking like a “pipe dream”.
He added: “We’re more likely to see a David and Brooklyn public embrace than a 2% inflation figure.
“This increase was widely predicted due to changes in tobacco tax and travel over Christmas. But it shows how volatile the UK’s inflation is and we’re a long way away from stability.
“The 2% target seems to be a pipe dream and targets need to be reasonably adjusted. Constantly missed targets do nothing to help borrowers in the UK.”
hilly Ponniah, Chartered Wealth Manager and Financial Coach at Philly Financial, said she was not shocked with the figures.
She continued: “This rise to 3.4% is not a shock, but it is a sober reminder that inflation is proving sticky rather than solved. Core inflation holding at 3.2% shows pressures are lingering in everyday services, not flaring up again, but also not disappearing.
“Looking ahead to 2026, inflation is likely to ease only gradually, with bumps along the way rather than a smooth return to 2%, as wage growth and services costs stay elevated.
“For rates, this makes quick cuts unlikely. The Bank of England will want clearer evidence inflation is beaten, so mortgage rates may drift down but borrowers should not expect a return to ultra-cheap deals.”
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