Inflation rises - 19th February 2025

Figures released today show the UK's inflation rate has risen to 3% in January, up from 2.5% in December 2024, marking a 10-month high. This increase surpasses the Bank of England's 2% target and has been primarily driven by higher transport costs with airfares not decreasing as anticipated and fuel prices rising. Food prices increased by 3.3% with notable rises in meat and dairy products and the new VAT has led to a 12.7% surge in private school fees. 

The unexpected rise in inflation has led financial markets to reassess the likelihood of imminent interest rate cuts by the Bank of England. While previous forecasts anticipated rate reductions, the current inflationary pressures suggest that such cuts may be delayed. Economists predict that inflation could reach 3.7% by the third quarter of 2025, influenced by higher energy prices and regulated tariffs. 

Households are expected to face further financial strain, with anticipated rises in broadband, mobile bills, energy, water, and council taxes. This situation is particularly challenging for retirees and those on fixed incomes.

Economists expect inflation to remain elevated throughout 2025 due to factors like higher energy prices and labour costs but anticipate it might decline in the latter half of the year.