UK inflation will fall in 2026

The UK can expect to see big falls in the rate of infla­tion this year, accord­ing to the Res­o­lu­tion Foun­da­tion.

The think tank’s pre­dic­tion comes despite an increase in Decem­ber 2025 that saw the UK end the year with the high­est head­line infla­tion of any G7 econ­o­my – an unwant­ed posi­tion it has now held for the past sev­en months.

UK infla­tion increased from 3.2% in Novem­ber to 3.4% in Decem­ber, keep­ing the UK at the top of the G7 leader­board.

CPI infla­tion expect­ed­ly increased in Decem­ber, dri­ven by tobac­co duty, air­fares and food. Food prices rose by 4.5% in the 12 months to Decem­ber, up 0.8% com­pared with Novem­ber. Bread and cere­als made the largest con­tri­bu­tion to this rise, which is dis­ap­point­ing giv­en such sta­ples make up a larg­er share of spend­ing for low­er-income fam­i­lies.

The think tank says that bet­ter news is com­ing this year, with the Bank of Eng­land fore­cast­ing a broad-based 0.5 per­cent­age point fall in Jan­u­ary. With infla­tion still below the Bank’s fore­cast, it remains on track to head back towards its tar­get rate over the course of 2026.

James Smith, Research Direc­tor at the Res­o­lu­tion Foun­da­tion, said:

‘UK infla­tion end­ed last year on a ‘high’ with an unwel­come uptick in price ris­es.

‘And while Britain hopes to lead the G7 eco­nom­ic leader­board for growth, it has instead spent the last sev­en months at the top of the charts for infla­tion instead.

‘But big falls are due in 2026, with infla­tion final­ly return­ing to back to more nor­mal lev­els. How­ev­er, the scars from a long peri­od of acute price pres­sures will con­tin­ue to be felt by fam­i­lies.’