UK inflation climbed to 3.4% in the year to December, according to official figures, marking the first increase in five months. The unexpected rise, surpassing economists' predictions of a slight uptick to 3.3%, was attributed to temporary factors such as higher tobacco prices and increased airfares during the Christmas period.

The jump in inflation arrives ahead of the Bank of England's upcoming meeting on February 5, where policymakers will decide on interest rates. The Bank concluded 2025 by reducing borrowing costs to 3.75%.

Michael Saunders, a former member of the Bank's rate-setting committee, suggested the inflation spike was not indicative of a sustained upward trend. "It reflects a variety of fairly temporary erratic factors," Saunders stated, adding that he anticipates the Bank will refrain from cutting borrowing costs in February but will likely announce "gradual" cuts later in the year.

The rise in tobacco prices stemmed from a tax increase announced in the Budget, while airfare costs typically surge during the holiday season due to increased demand. These one-off events contributed significantly to the overall inflation rate for December.

While the inflation increase may cause some concern among consumers, analysts largely believe the temporary nature of the contributing factors will prevent a prolonged period of rising prices. The Bank of England will closely monitor economic data in the coming months to determine the appropriate course of action regarding interest rates.