UK inflation unexpectedly rises to 3.4% as tobacco tax and travel costs bite

Despite months of disinflation, UK consumer price inflation ticked up to 3.4% in December, driven by higher tobacco duties and a seasonal jump in airfares that pushed the CPI basket’s transport and alcohol & tobacco components sharply higher. Food prices, especially for basics like bread and cereals, also added to cost-of-living pressures, keeping the rate above the Bank of England’s 2% target. Economists largely view the uptick as temporary “noise” rather than a structural shift in price dynamics, with forecasts still pointing to a return toward trend inflation and potential interest rate cuts later in 2026.

UK inflation rises for first time in five months - but one-off factors blamed - BBC News

1. Explain how the uptick in inflation is likely a consequence of temporary ‘noise’.

2. Discuss why the Chancellor says her priority is ‘cutting the cost of living’.

3. "A record-high tax burden and irresponsible borrowing are stifling growth and fuelling inflation – leaving working people worse off." Using your economic knowledge, assess the validity of the shadow Chancellor’s criticism of government economic policy.