Why 2026 is set to be a good year for inflation in the UK
The UK’s latest CPI figures point to a cooling and a return to more stable inflation in the coming year.
The Consumer Prices Index (CPI) rose by 3.2% in the 12 months to November 2025, down from 3.6% in the 12 months to October, data published by the Office for National Statistics on Wednesday (17 December) shows.
On a monthly basis, CPI fell by 0.2% in November 2025, compared with a rise of 0.1% in November 2024. The largest downward contributions were from the food and non-alcoholic beverages and alcohol and tobacco divisions.
Thedrop to 3.2% takes headline CPI to its lowest level in eight months and represents the largest month-on-month fall for over a year. It’s a significantly larger fall than expected, suggesting the UK may have turned a corner into sustained disinflation, said Adam Deasy, Economist at PwC.
“Food prices were the one sour note in October, and a significant risk factor given how much they can influence households’ price expectations.
“But in November they have led the way in pulling CPI downwards, together with alcohol and clothing, in bringing all goods inflation down to 2.1%. Services have proved more stubborn and will still be front of mind for the Bank of England.”
After keeping rates on hold in November, a few factors point to the Bank being able to cut on Thursday, Deasy said.
“The Autumn Budget included several measures that will mechanically reduce inflation going forward, such as rail fare and prescription charge freezes.
“Together with today’s significantly softer CPI print and an uptick in the unemployment rate on Tuesday, the pain point for the UK economy may now be weakening demand rather than higher prices. At risk of counting our turkeys before they have hatched, 2026 could mark the long-awaited return to low and stable inflation,” he said.
