In December 2025, UK inflation is expected to rise slightly to 3.3% from 3.2% in November, with core inflation also forecast to increase to 3.3%. The Bank of England is not expected to lower interest rates at the February meeting, despite a modest increase in inflation.

UK inflation peaked in July 2025 and has been on a downward trend since, dropping from 3.6% in October to 3.2% in November. Economists predict that inflation will stabilize around 3.3% by the end of 2025.

Geopolitical tensions, such as the threat of US tariffs over Greenland, add uncertainty to UK inflation forecasts. Trade conflicts could have a stagflationary effect on global economies, impacting central bank policies and potentially limiting the Bank of England’s ability to ease interest rates.

Morningstar’s Slade forecasts a slowdown in UK economic growth in 2026, which is expected to have a significant impact on inflation. Labor market data suggests a widening labor market slack, signaling a disinflationary impulse in the economy. Inflation is projected to revert close to the Bank of England’s 2% target by the end of the year.

Read more at Morningstar: What to Expect from December’s UK Inflation Data