Why did UK inflation rise in December?

Airfares and tobacco duty were the main one-off drivers behind the UK inflation December uptick to 3.4%. Services costs also remain sticky. While these factors can fade, the Bank wants more evidence of cooling core pressures before backing easier policy.

Is a BoE February meeting rate cut now off the table?

Markets see a very low chance of a BoE February meeting cut. The base case has shifted to April or later, depending on services inflation, wage growth, and PMIs. Softer data could bring forward easing, while sticky prints would push it back.

How could this affect UK mortgage rates?

The surprise inflation print lifted swap rates, so banks may pause recent trims to fixed offers. UK mortgage rates could steady or edge higher near term. If inflation cools again, lenders can resume cuts, but timing depends on data and funding costs.

What should Aussie investors with UK exposure do now?

Review GBP/AUD hedging, stagger any increases in gilt duration, and stress test UK-linked cash flows. For equities, balance rate-sensitive names with defensives and firms with pricing power. Property buyers tied to the UK may consider locking rates earlier to manage risk.

Global Market Insights

Bank of England Rate Cuts Pushed Back After CPI Surprise — January 23

ByDanny Kontos January 23, 2026January 23, 2026

Bank of England rate cut hopes took a hit after UK inflation December rose to 3.4%, driven by airfares and tobacco duty. Markets have priced out a BoE February meeting move, pointing to April or later. For Australian investors, this affects GBP/AUD, UK bond yields, and property financing linked to the UK. We outline what changed, why it matters, and how to position portfolios while we wait for clearer guidance from the Bank of England and fresh data prints.