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$3.90K
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This is a market about the variation of consumer prices in the U.K. over the 12-month period ending December 2025, before seasonal adjustment, as reported by the Office for National Statistics (ONS). This market will resolve according to the number the Consumer Price Index (CPI) increased by over the 12-month period ending December 2025 (% change) according to the monthly ONS report. The resolution source for this market will be the ONS Consumer Price Index monthly report released for December
Prediction markets currently assign an 82% probability that the U.K.'s monthly Consumer Price Index (CPI) inflation for December 2025 will be 0.3% or higher. This high confidence level indicates traders view a monthly rise of at least 0.3% as the overwhelming base case. For context, a monthly print at or above this threshold would typically signal persistent inflationary pressures, complicating the Bank of England's path to its 2% annual target.
Two primary factors are supporting this high-probability bet. First, historical seasonal patterns show that December inflation frequently experiences upward pressure from categories like alcohol, tobacco, and transportation costs during the holiday period. Second, recent monetary policy signals are critical. The Bank of England held its Bank Rate steady at 5.25% throughout late 2025, reflecting a cautious stance against entrenched inflation. Market pricing suggests traders believe this "higher for longer" stance has not yet fully subdued month-on-month price rises, especially in services inflation, which remains stubborn.
The consensus high-probability view faces a key downside risk from the upcoming ONS data release itself, due in six days. A surprise print below 0.3%, perhaps driven by a sharper-than-expected drop in energy prices following mild winter weather or aggressive discounting in holiday retail sales, would prove the market wrong. Given the relatively thin trading volume of approximately $2,000, the current 82% price is susceptible to significant volatility if preliminary leaks or analyst forecasts in the days before the release contradict the prevailing sentiment. The market's resolution will provide a crucial real-time snapshot of the U.K.'s ongoing inflation battle at year-end.
AI-generated analysis based on market data. Not financial advice.
The December Inflation U.K. - Annual prediction market focuses on forecasting the percentage change in the U.K. Consumer Price Index (CPI) over the 12 months ending in December 2025. This figure represents the headline annual inflation rate for the final month of 2025, as calculated and published by the Office for National Statistics (ONS). The CPI measures the average change in prices paid by consumers for a basket of goods and services, including food, energy, housing, and transportation, providing the government's official gauge of inflation. The resolution of this market depends entirely on the official ONS monthly CPI report for December 2025, which is typically released in mid-January 2026. Interest in this specific inflation reading is exceptionally high due to its position as a critical year-end economic indicator. It serves as a final report card on price stability for the year and heavily influences monetary policy decisions by the Bank of England, wage negotiations, government fiscal planning, and financial market valuations. The December figure often carries additional weight as it reflects seasonal spending patterns during the Christmas period and can signal inflationary trends heading into the new year. Recent context has been dominated by a prolonged period of elevated inflation following the COVID-19 pandemic and the energy price shocks triggered by the war in Ukraine. The Bank of England's Monetary Policy Committee has aggressively raised interest rates to a 16-year high in an attempt to return inflation to its 2% target. Market participants, including investors, economists, and policymakers, are closely watching whether these measures will successfully tame price pressures by the end of 2025 or if structural factors will keep inflation persistently above target. The prediction market allows participants to aggregate collective intelligence on this crucial economic variable. Traders bet on the specific inflation number, synthesizing data on energy prices, global supply chains, labor market tightness, fiscal policy announcements, and monetary policy signals. The outcome has direct implications for interest rate expectations, bond yields, and the valuation of inflation-linked assets, making it a focal point for economic forecasting.
Understanding the December 2025 inflation forecast requires context from the volatile inflationary period that began in 2021. UK CPI inflation rose sharply from 0.6% in January 2021, peaking at 11.1% in October 2022, its highest rate in over 40 years. This surge was driven by a combination of post-pandemic supply chain bottlenecks, soaring global energy prices following Russia's invasion of Ukraine in February 2022, and strong consumer demand fueled by fiscal support. The Bank of England, which had kept its Bank Rate at a historic low of 0.1% until December 2021, embarked on a rapid tightening cycle. By December 2023, inflation had fallen to 4.0%, but the path downward proved bumpy and slower than many expected, particularly due to stubbornly high services inflation and wage growth. The Bank Rate reached 5.25% in August 2023 and remained there through mid-2024. Historical precedent shows that once inflation becomes embedded in wage-setting and price expectations, it can be difficult to dislodge, a phenomenon the Bank of England is keen to avoid repeating from the 1970s and 1980s. The December reading each year serves as a major benchmark; for instance, December 2022's CPI was 10.5%, highlighting the intense price pressures at that time.
The December 2025 inflation rate is a cornerstone metric for the UK's economic health and stability. If inflation remains significantly above the Bank of England's 2% target, it will likely force the MPC to maintain high interest rates or hike further. This increases mortgage costs for millions of households on variable-rate or re-fixing deals, dampens business investment, and can increase government debt servicing costs, potentially leading to tougher spending decisions or higher taxes. Persistently high inflation erodes the real value of savings and wages, disproportionately harming those on lower and fixed incomes. Politically, the inflation number will be a key measure of the governing party's economic competence in the run-up to a general election that must be held by January 2025. Financially, it determines the annual uprating of state pensions, benefits, and many commercial contracts indexed to CPI. For markets, the outcome directly influences the pricing of UK government bonds (gilts), particularly index-linked gilts, and shapes currency valuations. A higher-than-expected print could trigger market volatility and increase borrowing costs across the economy, while a lower print could boost consumer confidence and spending power.
As of mid-2024, UK inflation has fallen substantially from its peak but remains above target. The Consumer Prices Index (CPI) rose by 2.3% in the 12 months to April 2024, down from 3.2% in March, moving closer to the Bank's 2% target. However, services inflation and wage growth remain elevated, prompting caution from the Bank of England's Monetary Policy Committee. The MPC has held the Bank Rate at 5.25% since August 2023, indicating a 'higher for longer' approach to ensure inflation is sustainably defeated. Market expectations for the first rate cut have been pushed back, with focus now on the persistence of domestic price pressures as global energy costs have stabilized.
The official UK CPI inflation rate for December 2025 will not be known until the Office for National Statistics publishes its monthly report in mid-January 2026. Prediction markets like this one allow participants to trade based on their forecasts of what that number will be, aggregating collective intelligence on future price changes.
The ONS calculates the CPI by tracking the price changes of a representative basket of about 700 goods and services commonly purchased by UK households. Prices are collected monthly from thousands of retail outlets and service providers across the country. The annual rate is the percentage change in the index compared to the same month one year earlier.
CPI measures consumer price inflation. CPIH (Consumer Prices Index including owner-occupiers' housing costs) is the ONS's lead measure and includes a measure of the costs associated with owning, maintaining, and living in one's own home, such as council tax. The Bank of England's target is based on CPI, but it monitors CPIH closely for a broader view.
The timing of interest rate cuts depends on the MPC's assessment of the inflation outlook. The Committee has stated it needs to see more evidence that services inflation and wage growth are slowing sustainably before it can consider cutting the Bank Rate from its current level of 5.25%. Markets currently anticipate the first cut could occur in late 2024 or 2025.
The recent high inflation was caused by a combination of global factors, including post-pandemic supply chain issues and soaring energy prices after the war in Ukraine, and domestic factors like a tight labor market pushing up wages and strong consumer demand. The balance of these forces determines the path of inflation.
Educational content is AI-generated and sourced from Wikipedia. It should not be considered financial advice.
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