UK Inflation Rises to 3.4% in December, Driven by Food and Transport Costs

• UK's headline consumer price inflation increased to 3.4% in December, up from 3.2% in November, exceeding forecasts.
• Higher airfares due to seasonal travel and increased tobacco duty were key contributors to the December inflation rise.
• Despite the uptick, economists and investors expect inflation to ease significantly in coming months, with the Bank of England likely to cut interest rates later this year.
• Services inflation also rose to 4.5% in December, aligning with expectations and closely watched by the Bank of England.
• The UK still has the highest inflation rate among G7 economies, but this is expected to change as energy bills fall and regulated prices roll off.

Why It Matters: UK inflation rose unexpectedly in December, but experts foresee a sharp decline and Bank of England rate cuts.