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.'