In fact, UK inflation jumped up to 3.4% in the year leading up to December 2025. This wave presented significant – and often discriminatory – challenges to consumers and policymakers alike. This shocking figure has occurred in a context in stark difference to the Bank of England’s inflation target of 2%. Despite efforts to stabilize the economy, inflation persists, raising questions about the underlying causes and potential solutions.
The increase in inflation has been the result of a series of events. In 2022, as the world recovered from the Covid pandemic, worldwide demand for oil and gas surged, driving up energy prices. The war in Ukraine made this already rising inflationary spiral worse by accelerating the effects on energy prices again, as Russia invaded Ukraine. These events had massive knock-on effects throughout the UK economy. As such, inflation exploded, hitting a peak rate of 11.1% in October 2022 — the highest level in 40 years.
To track these changes in inflation, the Consumer Prices Index (CPI) is an essential yardstick. To keep up with the changing world, the CPI is quickly and regularly reweighted to take into account the fact that shopping patterns are changing. In 2025, new entrants to the CPI basket included things such as virtual reality headsets and yoga mats. At the same time, local newspaper ads were removed from the equation. These changes reflect the developing patterns of UK consumer goods and services.
So far from the Bank of England’s target of 2%, UK inflation has been running above this target since last December. By December 2025, the unemployment rate averaged 5.1% from September to November. Second, this figure demonstrates that the labor market held up pretty well in this era of inflationary growth. That stability hasn’t been enough to bring down inflation, hinting at other underlying dynamics in the economy.
In the broader international picture, other major central banks have been hawkish in their monetary policy pivots aimed at countering inflationary pressures. US Federal Reserve December 2025 – The US Federal Reserve cut its target interest rate to a range of 3.50%-3.75%. The European Central Bank (ECB) lowered its main policy rate from 4% to 2% over the period June 2024–June 2025. Unfortunately, it has maintained this shamefully low rate ever since. These types of measures just re-emphasize the increasing pattern of central banks tackling great economic challenges by slashing interest rates.
The persistence of inflation is worrying for people living in the UK, who will experience increasing costs in their daily lives. With the CPI showing skyrocketing price increases across hundreds of other goods and services, consumers are understandably hurting. This situation raises important questions about the effectiveness of current monetary policy and what further actions might be necessary to bring inflation back within acceptable levels.
Furthermore, there is even more speculation about long-term effects of today’s inflation on consumer confidence and spending. Now, prices are shooting up. Ultimately, households will need to cut back on discretionary spending, which would slow the overall pace of economic growth in the years to come.