Why inflation scare stories don’t tell the full story

Over the last few months, there’s been hope that the rate of price increases might finally have peaked.

In fact, inflation fell to 3.2% in November - the lowest level in eight months and the second monthly drop in a row.

But with December’s figures set to be published this week, we’re seeing gloomy headlines saying that inflation may have ticked up slightly.

And while that makes for an eye-catching headline after a period of improvement, it leaves out some crucial details.

Inflation set to fall this year

You wouldn’t think so if you just glanced at the headlines, but many forecasts suggest inflation will actually ease during 2026.

The International Monetary Fund, for instance, believes inflation will fall back to the Bank of England’s target of 2% by the end of this year.

Deutsche Bank, meanwhile, expects inflation to drop “meaningfully” over the coming months.

UK chief economist Sanjay Raja is even predicting it could reach “near target by spring, boosting real disposable incomes”.

Of course, a fall in inflation doesn’t mean that you’ll see your household bills and food prices come down overnight.

But it does mean prices will be going up at a slower rate, which can ease the pressure on the cost of living.

December’s inflation figure can be misleading

Another important detail that can get lost in the headlines is exactly when the Office for National Statistics (ONS) collects its inflation data.

Prices of all sorts of goods and services can vary in the run-up to Christmas.

For example, travel prices would have been much higher during the school holiday period than earlier on in the month.

So the final headline figure might reflect the date that the ONS chose to measure prices, rather than point to a long-term trend.

How is inflation measured?

Imagine a shopping basket full of everyday items like bread and milk, along with bigger purchases like cars and televisions.

The ONS tracks the price of what’s in that basket every month - and the headline inflation figure shows how much it’s changed.

December’s inflation figures are set to be published on Wednesday.

Rest assured, we’ll be here to crunch the numbers and let you know what it means for you and your money.

And remember that the headline figure doesn’t always tell you everything you need to know.

Context really matters, so if inflation goes up on Wednesday, don't reach for the panic button.