Deutsche Bank (ETR:DBKGn) has raised its inflation forecast for the UK,
projecting that headline Consumer Price Index (CPI) inflation will rise to
3.1% in 2025, up from 2.6% in 2024.
This upward revision reflects continued pressures from core goods and
services despite signs of easing in some sectors.
Core CPI, which excludes volatile items such as energy and food, is
expected to decelerate only marginally, dropping from 3.75% in 2024 to
3.5% in 2025. Meanwhile, services inflation is forecast to decline from 5.5%
in 2024 to 4.5% in 2025, reflecting slower growth in key labour-intensive
sectors.
This development follows the release of November inflation numbers,
which showed an increase to 2.6% year over year, with the all-important
service inflation measure coming in at 5.0%.
The December edition of Deutsche Bank’s UK Inflation Chartbook highlights
several factors driving the persistent inflationary pressures through 2025.
Key contributors include strong wage growth from National Living Wage
increases, higher private rents, and administrative tax adjustments.
«The biggest upward driver for CPI remains services through our forecast,
with energy and core goods price pressures becoming less of a drag, too.» –
Deutsche Bank.
While energy prices are expected to exert less of a drag on the CPI in 2025,
services inflation – particularly within the housing, transport, and
labour-intensive sectors – remains a dominant force.
Inflation Drivers and Forecast Adjustments
Deutsche Bank’s revised outlook incorporates updated energy price
projections and assumptions surrounding Ofgem’s price cap. The bank
expects a modest reduction in energy bills in early 2025, followed by small
increases in subsequent quarters. Adjustments have also been made to
forecasts for core goods and services, with particular attention to rent
inflation, which has been on an upward trajectory.
Bank of England Faces 3.0%+ Inflation in2025: Deutsche Ban
