UK inflation continues to run relatively hot

21 January 2026

UK inflation continues to run relatively hot

Commenting on this morning's inflation figures, Julian Jessop, Economics Fellow at the free market think tank the Institute of Economic Affairs, said:

"The renewed acceleration in inflation in December, from 3.2% to 3.4%, was largely expected but no less unwelcome.

"The jump in the cost of living over the last few years is still being cemented in, while slowing wage growth and rising job insecurity will keep consumer confidence and spending subdued.

"The pickup in headline inflation was partly due to increases in tobacco duties and air fares, which the Bank of England had already anticipated.  

"However, inflation also rose in the food and hospitality sectors, reflecting the continued pass-through of higher labour and other costs resulting from policy choices.

"The government is seeking to blame 'global headwinds' for the increase in inflation since the summer of 2024. But the reality is that the UK has become an outlier again. In contrast, inflation has remained close to 2% in the euro area.

"UK inflation is still likely to fall to around 2% in April as regulated prices rise by less than in 2025. However, underlying cost and price pressures remain sticky, and medium-term inflation expectations are too high for comfort.

"The persistent weakness of economic activity and especially of the labour market means the door is still open for at least one more cut in interest rates in the coming months, but February’s MPC meeting is probably too soon."

ENDS

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Notes to Editors

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