The UK's annual inflation rate surged to 3% in January 2025, marking its highest level since March 2024, up from 2.5% in December and exceeding expectations of 2.8%.
UK inflation rate accelerates more than expected
The biggest upward pressures came from transport, which rebounded to 1.7% from -0.6%, driven largely by rising airfares and fuel prices, though partially offset by lower secondhand car prices. Food and non-alcoholic beverages also saw a notable increase, climbing to 3.3% from 2.5%, with meat and bread among the key contributors.
Other categories experienced faster price growth as well, including recreation and culture, which rose to 3.8% from 3.4%, and education, which jumped to 7.5% from 5% due to the addition of a 20% value-added tax on private school fees. Services inflation accelerated to 5% from 4.4%, though it remained slightly below the Bank of England’s forecast of 5.2%.
Where inflation eased
Meanwhile, inflation eased in certain sectors, with price growth slowing for restaurants and hotels (3.3% vs. 3.4%) as well as housing and utilities (2.1% vs. 3.1%). Core inflation, which excludes volatile items like food and energy, edged up to 3.7% from 3.2%, in line with market expectations. On a monthly basis, consumer prices dipped by 0.1%, a smaller decline than the anticipated 0.3% drop.
