UK inflation surges to 10-month high, raising rate hike concerns

Posted on February 19, 2025   |  

UK inflation climbed to 3% in January, marking a 10-month high and surpassing December’s 2.5% rate.

Rising airfares, food prices, and private school fees drove inflation higher, influenced by the Labour government’s new sales tax.

Experts had predicted inflation to reach 2.8%, but the unexpected jump has raised concerns among Bank of England policymakers.

With inflation exceeding the Bank of England’s 2% target, immediate interest rate cuts seem less likely.

The Bank of England lowered its key interest rate to 4.50%, its third reduction in six months, while cutting its 2025 growth forecast to 0.75%.

The combination of slow economic growth and persistent inflation complicates policy decisions, as officials weigh rate adjustments.

The government anticipates further rate cuts to lower mortgage and loan costs, though this could reduce returns for savers.