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Trump Administration to Create a Strategic Reserve for Rare Earths Elements
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WASHINGTON (AP) — The Trump administration plans to deploy nearly $12 billion to create a strategic reserve of rare earth elements, a stockpile that could counter China’s ability to use its dominance of these hard to process metals as leverage in trade talks.
The White House confirmed on Monday the start of “Project Vault,” which would initially be funded by a $10 billion loan from the US Export-Import Bank and nearly $1.67 billion in private capital. The minerals kept in the reserve would help to shield the manufacturers of autos, electronics and other goods from any supply chain disruptions.
During trade talks last year spurred by President Donald Trump’s tariffs, the Chinese government restricted the exporting of rare earths that are needed for jet engines, radar systems, electric vehicles, laptops and phones.
China represents about 70% of the world’s rare earths mining and 90% of global rare earths processing. That gave it a chokehold on the sector that has caused the U.S. to nurture alternative sources of the elements, creating a stockpile similar to the national reserve for petroleum.
The loan would be for a period of 15 years. The U.S. government has previously taken stakes in the rare earths miner MP Materials, as well as providing financial backing to the companies Vulcan Elements and USA Rare Earth.
Bloomberg News was the first to report the creation of the rare earths strategic reserve.
Trump is scheduled on Monday to meet with General Motors CEO Mary Barra and mining industry billionaire Robert Friedland.
Copyright 2026 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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In Minneapolis, All-Encompassing Immigration Story Tests a Newsroom in Midst of Digital Transition
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With the eyes of a nation fixed on the unrest in Minneapolis, the events haven’t left local journalists overmatched.
Over the past month, the Minnesota Star Tribune has broken stories, including the identity of the immigration enforcement officer who shot Renee Good, and produced a variety of informative and instructive pieces. Richard Tsong-Taatarii’s photo of a prone demonstrator sprayed point-blank with a chemical irritant quickly became a defining image. The ICE actions have changed how the outlet presents the news.
At a time when many regional newspapers have become hollowed-out shells due to the decline in journalism as a business, the Star Tribune has kept staffing relatively steady under billionaire Glen Taylor, who has owned it since 2014. It rebranded itself from the Minneapolis Star Tribune and committed itself to a digital transformation.
It was ready for its moment.
“If you hadn’t invested in the newsroom, you wouldn’t be able to react in that way,” said Steve Grove, publisher and chief executive.
Minnesota’s robust journalism tradition
The Star Tribune hasn’t operated in a vacuum. Minneapolis has a robust journalism tradition, particularly on public radio and television. Sahan Journal, a digital newsroom focusing on immigrants and diverse communities, has also distinguished itself covering President Donald Trump’s immigration efforts and the public response.
“The whole ecosystem is pretty darn good,” said Kathleen Hennessey, senior vice president and editor of the Star Tribune, “and I think people are seeing that now.”
While national outlets have made their presence felt, strong local teams offer advantages in such stories. The Star Tribune’s Josie Albertson-Grove was one of the first journalists on the scene after ICU nurse Alex Pretti was shot dead on Jan. 24. She lives about a block away, and her knowledge of the neighborhood and its people helped to reconstruct what happened.
Journalists with kids in school learned about ICE efforts to target areas where children gather by hearing chatter among friends. While covering a beat like public safety can carry baggage, Star Tribune reporter Liz Sawyer developed sources that helped her, along with colleagues Andy Mannix and Sarah Nelson, report on who shot Good.
Besides those contacts, the staff simply knows Minnesota better than outsiders, Hennessey said.
“This is a place with a really, really long and entrenched tradition of activism, and a place with really deep social networks and neighborhood networks,” she said. “People mobilize quickly and passionately, and they’re noisy about it. That’s definitely been part of the story.”
A Signal chat tipped Tsong-Taatarii about a demonstration growing raucous on Jan. 21. Upon arriving, he focused his lens on one protester knocked to the ground, leaving the photographer perfectly placed for his richly-detailed shot. Two officers hold the man face-down with arms on his back, while a third unleashes a chemical from a canister inches from his face. The bright yellow liquid streams onto his cheek and splatters onto the pavement.
What some have called the sadistic cruelty involved in the episode outraged many who saw the photo. “I was just trying to document and present the evidence and let people decide for themselves,” Tsong-Taatarii said.
‘A badge to prove I belong’
In one enterprising story, the Star Tribune’s Christopher Magan and Jeff Hargarten identified 240 of an estimated 3,000 immigrants rounded up in Minnesota, finding 80% had felony convictions but nearly all had been through the court system, been punished and were no longer sought by police. Hargarten and Jake Steinberg collaborated on a study of how the size of the federal force compared with that of local police.
Columnist Laura Yuen wrote that her 80-year-old parents have begun carrying their passports when they leave their suburban townhouse, part of the “quiet, pervasive fear” in the Twin Cities. Yuen downloaded her own passport to carry on her phone. “A document that once made me proud of all the places I’ve traveled is now a badge to prove I belong,” she wrote.
A piece by Kim Hyatt and Louis Krauss detailed the health consequences of chemical irritants used by law enforcement — or thought to be used, since questions about what specifically was deployed went unanswered.
“I really think they’ve done a commendable job,” said Scott Libin, a veteran television newsman and journalism professor at the University of Minnesota. He praised the Star Tribune’s story about the criminal backgrounds of immigrants as thorough and dispassionate.
Since Hennessey, a former Associated Press editor, began her job last May, the Star Tribune has experienced a run of big stories, including the shooting of two state lawmakers and a gunman opening fire at a Catholic school in Minneapolis. And, of course, “we have a newsroom that still has muscle memory from George Floyd ” in 2020, Grove said.
News compelled fundamental shifts in the way the Star Tribune operates. Like some national outlets, it has rearranged staff to cover the story aggressively through a continuously updated live blog on its website, offered free to readers. There’s also a greater emphasis on video, with the Star Tribune doing forensic studies on footage from the Pretti and Good shootings, something few local newsrooms are equipped to do. Traffic to its website has gone up 50 percent, paid subscriptions have increased and the company is getting thousands of dollars in donations from across the country, Grove said.
“People have changed the way that they consume news,” Hennessey said. “We see that readers are coming back. You know, they’re not just waking up in the morning, reading the site and then forgetting about us all day long. They’re coming back a couple of times a day to check in on what’s new.”
Most people in the newsroom are contributing to the story, including the Star Tribune’s food and culture team, and its outdoor reporters. “There are no normal beats anymore,” Albertson-Grove said.
A rapid transformation to a digital-first newsroom
Under Grove, a former Google executive, the Star Tribune has attempted a digital-first transition, turning over about 20% of its staff in two years. The paper shut its Minneapolis printing plant in December, laying off 125 people, and moving print operations to Iowa.
“We face every single headwind that every local news organization in the country does,” Grove said. “But we do feel fortunate that we’re the largest newsroom in the Midwest and it’s part of the reason we’re able to do this now.”
As a reporter, Sawyer says the public response to the outlet’s work, sharing stories and images, has lifted her spirits. Readers see it as public service journalism. Still, she could use a break. She and her husband, Star Tribune photographer Aaron Lavinsky, have a baby daughter and make sure to stagger their coverage. They can’t both be tear-gassed or arrested at the same time; who makes the daycare pickup?
“I think both residents and journalists in this town are running on fumes,” she said. “We’re tired of being in the international spotlight and it’s never for something positive. People are trying their best to get through this moment with grace.”
Copyright 2026 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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Starbucks Feels the Heat as More Chains Compete for US Coffee Drinkers
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NEW YORK (AP) — Americans are drinking more coffee than they have in decades. But fewer of them are getting it from Starbucks.
The company that revolutionized U.S. coffee culture remains America’s biggest player, with nearly 17,000 U.S. stores and plans to open hundreds more. But it’s facing unprecedented competition, which will make it harder to win back the customers it already lost.
Starbucks’ share of spending at all U.S. coffee shops fell in 2024 and 2025; it now stands at 48%, down from 52% in 2023, according to Technomic, a food industry consulting firm. Dunkin ‘, a perennial rival that just opened its 10,000th U.S. store, gained market share in both of those years.
Starbucks has other challengers, like the fast-growing drive-thru chains 7 Brew, Scooter’s Coffee and Dutch Bros. Chinese chains like Luckin Coffee and Mixue are opening U.S. stores. High-end coffee shop Blue Bottle, which has 78 U.S. stores, has opened two more since the start of the year. Even McDonald’s and Taco Bell are bolstering their beverage offerings.
“People haven’t fallen out of love with Starbucks, but they’re now polyamorous in their coffee choices,” said Chris Kayes, chair of the management department in the George Washington University School of Business. “People are now experimenting with other coffees, and they’re seeing what’s out there.”
Americans love coffee. In both 2024 and 2025, an estimated 66% of Americans reported drinking coffee every day, up 7% from 2020, according to the National Coffee Association, an industry trade group.
Coffee chains are racing to cash in on that demand. The number of chain coffee stores in the U.S. jumped 19% to more than 34,500 over the last six years, according to Technomic, a consulting firm that researches the foodservice industry.
Seattle-based Starbucks was a small, regional chain when former CEO Howard Schultz acquired it in 1987. Now, other small chains are seeing explosive growth. Nebraska-based Scooter’s Coffee had 200 locations in 2019; it now has more than 850. Arkansas-based 7 Brew, which had 14 locations in 2019, now has more than 600.
“There’s too much supply relative to demand,” said Neil Saunders, a managing director and retail analyst at consulting firm GlobalData Retail
Saunders said Starbucks’ size is somewhat of a disadvantage, since it has less ability to grow sales by opening new locations.
“Honestly, they’re pretty saturated,” Saunders said. “They’re a very mature business.”
“Growth doesn’t require us to become something new. It requires us to be exceptionally good at what we already are,” Starbucks Chief Operating Officer Mike Grams said.
Starbucks expects to open more than 575 new U.S. stores over the next three years. It developed a smaller-format store that is cheaper to build but still has indoor seating, drive-thru lanes and mobile pickup. The company said the reduced scale would allow Starbucks stores to operate in locations they couldn’t before.
Starbucks is also adding new products, like updated pastries and snackable foods that are high in protein and fiber, to try to win back customers.
Lack of menu innovation is one reason Starbucks has struggled, especially among younger consumers who like novelty and will try new places to find it, Saunders said.
Arizona-based Dutch Bros, for example, added protein coffee drinks in January 2024, nearly two years before Starbucks did. Energy drinks make up 25% of Dutch Bros’ business almost 14 years after the chain introduced them. Starbucks offered iced energy drinks for a limited time in 2024; executives said Thursday that customizable energy drinks would appear on the Starbucks menu soon.
Dutch Bros, which is led by former Starbucks executive Christine Barone, has just over 1,000 shops in the U.S. and hopes to double that number by 2029. It’s betting that customers want speed and convenience; nearly all of its stores are drive-thrus with walk-up windows.
Dutch Bros also focuses on value. In a recent meeting with investors, Barone pointed out that Dutch Bros’ medium drinks are 24 ounces; at Starbucks, a medium drink is 16 ounces.
Luckin, whose app brims with coupons and promotions, is also value-oriented. On a recent afternoon, one of its nine New York stores buzzed with customers picking up mobile orders. The tiny shop had no seating.
Xunyi Xie, who was visiting New York from his home in Delaware, said he stopped by to try a Velvet Latte because Luckin had a $1.99 drink promotion. Xie said he normally brews his own espresso, but if Luckin opened a store that was on his way to work, he would go there.
As for Starbucks? “I think it’s overpriced,” Xie said.
In 2024, the average customer spent $9.34 at Starbucks, compared to $8.44 at Dutch Bros and $4.68 at Dunkin’, according to an analysis by the investment research company Morningstar.
Starbucks didn’t raise prices in its 2025 fiscal year and has vowed to be judicious about future increases. But Ari Felhandler, an equity analyst with Morningstar, said it would be a mistake for Starbucks to try to win over customers with discounts because competitors will always go lower.
“Keep your prices the same and try to justify them,” Felhandler said. He thinks Starbucks’ store redesigns and new menu items will bring back traffic.
Grams, Starbucks’ chief operating officer, said the company firmly believes its best way forward is not drive-thru-only stores or mobile pickup kiosks. It’s building cafes with comfortable seating — the “soul of Starbucks,” as he put it — that also serve mobile, drive-thru and delivery customers. Customers sometimes want something convenient, and they sometimes want to dwell, he said.
“There’s always going to be competition. We’re aware of it, we keep an eye on it for sure, but we don’t try to be them,” Grams told The Associated Press. “We offer something that most people don’t, which is a legitimate space to sit down, enjoy and use it for a variety of different reasons.”
But Kayes, of George Washington University, wonders if that strategy will be enough to keep Starbucks on top, or if customers who want a cozy or premium experience have already moved on to independent coffee shops or upscale chains like Blue Bottle.
“In some ways, I think they are a victim of their own success,” Kayes said. “I do think that the aura of Starbucks as being something special and unique and exciting isn’t there anymore.”
Copyright 2026 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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Rubio Details How the Trump Administration Will Control Venezuela’s Oil Money
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WASHINGTON (AP) — The Trump administration soon will allow Venezuela to sell oil now subject to U.S. sanctions, with the revenue initially dedicated to basic government services such as policing and health care and subject to Washington’s oversight, Secretary of State Marco Rubio said Wednesday.
“The funds from that will be deposited into an account that we will have oversight over,” Rubio said, adding that the U.S. Treasury would control the process. Venezuela, he said, “will spend that money for the benefit of the Venezuelan people.”
The U.S. will not subsidize oil industry investments in Venezuela, Rubio said, and is only overseeing the sale of sanctioned petroleum as an “interim step.”
“This is simply a way to divide revenue so that there isn’t systemic collapse while we work through this recovery and transition,” Rubio said.
“You are taking their oil at gunpoint, you are holding and selling that oil … you’re deciding how and for what purposes that money is going to be used in a country of 30 million people,” Murphy said. “I think a lot of us believe that that is destined for failure.”
Under Maduro, Rubio said Venezuela’s oil industry benefited the country’s corrupt leaders and countries such as China, which purchased Venezuelan oil at a discount. Now, Venezuela’s interim leaders are assisting the U.S. in seizing illegal oil shipments, he said.
The U.S. will give Venezuela’s current leaders instructions on how the money can and cannot be spent and conduct audits to ensure it is used as intended, Rubio said. He said Venezuela could use the money to pay for policing or to buy medicine.
The fund was initially set up in Qatar to avoid having the proceeds seized by American creditors and because of other legal complications that stem from the U.S. not considering Maduro’s government legitimate, Rubio said.
Hundreds of millions of dollars have already been set aside and as much as $3 billion more is anticipated, he said.
“It’s an account that belongs to Venezuela, but it has U.S. sanctions as a blocking mechanism,” Rubio said. “We only control the dispersal of the money, we don’t control the actual money.”
Earlier this month, acting Venezuelan President Delcy Rodríguez said cash from oil sales would flow into two sovereign wealth funds: one to support crisis-stricken health services and a second to bolster public infrastructure, including the electric grid.
The country’s hospitals are so poorly equipped that patients are asked to provide supplies needed for their care, from syringes to surgical screws. They also must pay for lab and imaging tests at private hospitals.
On Tuesday, during a televised event to announce the revamping of various health care facilities, Rodríguez said her government and the U.S. administration “have established respectful and courteous channels of communication” since Maduro was captured.
Neither Rodríguez nor her government’s press office immediately comment on Rubio’s remarks Wednesday.
At Rodríguez’s request, Venezuelan lawmakers last week began debating an overhaul of the country’s energy law. The proposed changes are meant to create conditions to attract much-needed private foreign investment.
Garcia Cano reported from Caracas, Venezuela.
Copyright 2026 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Photos You Should See – January 2026
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What Travelers Can Expect as Southwest Airlines Introduces Assigned Seats
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Starting Tuesday, customers on Southwest flights will have assigned seats and the option of paying more to get their preferred seat closer to the front of a plane or seats with extra legroom. The airline began selling tickets shaped by the new policy in July.
Here’s what travelers can expect as Southwest does away with another of its signature features and becomes more like other airlines:
Under the open-seat system, Southwest customers could check in starting exactly 24 hours before departure to secure places in boarding lines at departure gates.
Early check-ins were placed in the coveted “A” boarding group, essentially guaranteeing they would find an open window or aisle seat. Others landed in “B” or “C,” the likelihood of only middle seats being available rising the longer they waited to check in.
The Dallas-based airline’s unusual seating process began as a way to get passengers on planes quickly and thereby reduce the time that aircraft and crews spent on the ground not making money. It helped Southwest operate more efficiently and to squeeze a few more flights into the daily schedule; the system also was a key reason Southwest remained profitable every year until the coronavirus pandemic.
The open-seating arrangement became less democratic over time, however, as Southwest also had starting allowing passengers to pay extra for spots near the front of the line.
An eight‑group boarding structure is replacing the find-your-own-seat scrum. Instead of numbered metal columns at departure gates, passengers will file through two alternating lanes once it’s time for their group to board.
The airline said its gate areas will be converted in phases starting Monday night, a process that could take about two months to complete. Columns that remain standing past Tuesday will have their numbers removed or covered in the meantime.
Southwest is selling tickets at fares with different seating choices, including standard seats assigned at check‑in or paid preferred and extra‑legroom seats selected at booking. For certain flights, passengers also will have the option of paying for priority boarding beginning 24 hours before departure.
Newly designed boarding passes will show seat assignments and boarding groups, according to Southwest. A reservation made for nine or fewer people, including families, will assign those passengers to the same boarding group.
Southwest says the boarding groups are based on seat location, fare class, loyalty tier status and the airline’s credit card rewards benefits. Passengers who purchase seats with extra legroom will be placed in groups 1-2. Customers with premium fares and the airline’s “most loyal travelers” will also have access to preferential seats and earlier boarding, the carrier said, while those with basic fares will likely be placed in groups 6-8.
With the switch to assigned seating also comes a revision of the airline’s policy for customers who need extra room. Under the new rule — also effective Tuesday — travelers who do not fit within a single seat’s armrests will be required to purchase an additional seat in advance.
That represents a change from the airline’s previous policy that allowed passengers the choice to purchase a fully refundable extra seat before arriving at the airport, or request a free one at the gate. Under the updated policy, refunds are still possible but no longer guaranteed and depend on seat availability and fare class.
In May 2025, Southwest also ended its decades‑old “bags fly free” policy, replacing it with baggage fees for most travelers.
The changes mark one of the biggest transformations in the airline’s history, as it alters its longstanding customer perks to bring it more in line with the practices of other larger U.S. carriers.
“We have tremendous opportunity to meet current and future customer needs, attract new customer segments we don’t compete for today, and return to the levels of profitability that both we and our shareholders expect,” Southwest CEO Robert Jordan said last year.
When the Texas-based airline first announced plans in 2024 to switch to assigned seating, it said studies on seating options showed that customer preferences had changed over the years, with the vast majority of travelers saying they now want to know where they are sitting before they get to the airport.
Jordan said at the time that open seating was the top reason surveyed travelers cited for choosing another airline over Southwest.
Copyright 2026 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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Trump threatens to sue JPMorgan Chase for ‘debanking’ him
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Jamie Dimon, Chairman and CEO, JPMorganChase, speaks during the Reagan National Defense Forum at the Ronald Reagan Presidential Library in Simi Valley, California, U.S. December 6, 2025.
Jonathan Alcorn | Reuters
President Donald Trump on Saturday threatened to sue JPMorgan Chase over allegedly “debanking” him following the Jan. 6, 2021, riot at the U.S. Capitol.
“I’ll be suing JPMorgan Chase over the next two weeks for incorrectly and inappropriately DEBANKING me after the January 6th Protest, a protest that turned out to be correct for those doing the protesting,” Trump said in a social media post. “The Election was RIGGED!”
“While we won’t get specific about a client, we don’t close accounts because of political beliefs,” said JPMorgan spokesperson Trish Wexler. “We appreciate that this Administration has moved to address political debanking and we support those efforts.”
In August, Trump signed an executive order requiring banks to ensure they are not refusing financial services to clients based on religious or political beliefs, a practice known as “debanking.”
Trump claimed without evidence in an August CNBC interview that he was personally discriminated against by banks. He said JPMorgan Chase and Bank of America refused to take his deposits following his first term in office.
At the time, JPMorgan said it does not close accounts for political reasons, while Bank of America said it doesn’t comment on client matters. BofA also said it would welcome clearer rules from regulators on how to conduct its activities.
Trump and his family have a history of railing against financial institutions for allegedly refusing to work with them on the basis of their political orientation.
Last year, Donald Trump Jr. said his family had difficulty accessing big bank services — a situation that allegedly prompted the Trumps to enter the cryptocurrency industry.
“So, [my family] got into crypto, not because it was like, ‘hey, this is the next cool thing,’ we got into it out of necessity,” Trump Jr. told CNBC in an interview last June.
JPMorgan shares are down about 5% over the past week, even after the bank on Tuesday topped expectations for its fourth-quarter earnings and revenue. The shares, and others in the banking sector, fell in response to Trump’s demand to cap credit card rates at 10%, giving financial firms until Jan. 20 to comply.
Trump’s legal threat against JPMorgan comes as the president, in the same Truth Social post, denied a Journal report on Wednesday that said the president had offered JPMorgan CEO Jamie Dimon the position of Federal Reserve chairman months ago during a meeting at the White House.
Dimon took the proposition as a joke, according to the Journal report.
In his post, Trump denied the report, underscoring his reservations about Dimon and JPMorgan.
“This statement is totally untrue, there was never such an offer,” he wrote. “Why wouldn’t The Wall Street Journal call me to ask whether or not such an offer was made? I would have very quickly told them, “NO,” and that would have been the end of the story.”
JPMorgan’s Wexler said the “offer” reported by the Journal was a miscommunication. “I should have been more vigilant in correcting that word while attempting to dispute the WSJ’s anonymous sources,” she said.
The Journal did not immediately respond to a request for comment sent outside of normal business hours.
Current Fed Chairman Jerome Powell’s term ends on May 15.
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EU Commission Indicates It’s Ready to Implement Mercosur Trade Deal Despite Parliament Vote to Delay
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FRANKFURT, Germany (AP) — The European Union is willing to implement a sweeping free trade agreement with the Mercosur group of South American countries on a provisional basis, the head of the EU’s executive commission said Friday, despite a vote by the EU parliament to delay ratification for legal review.
The EU would be ready to act as soon as at least one Mercosur country ratifies, European Commission President Ursula von der Leyen said at the conclusion of a summit of EU leaders in Brussels where several national leaders raised the issue.
“There is a clear interest that we ensure that the benefits of this agreement apply as soon as possible,” von der Leyen said at a news conference. “In short, we will be ready when they are ready.”
No formal decision to implement the deal had been taken yet, she said.
At the same news conference, Antonio Costa, head of the EU council of member governments, said the executive commission had the authority to move ahead on interim implementation.
A decision to do that is likely to provoke criticism from opponents of the deal, led by France. On Wednesday, the parliament narrowly voted to refer the trade deal to the European Court of Justice for legal review, holding up ratification since the parliament cannot vote on ratification until the court rules. That could take months.
The deal is central to Brussels’ plan to form trade relations outside a historic dependency on the U.S. in the wake of antagonism and aggression during U.S. President Donald Trump’s second term. They’ve struck deals from Japan to Mexico and are expected to sign a similar accord with India later this month.
Supported by South America’s cattle-raising countries and European industrial interests, the accord is aimed at gradually eliminating more than 90% of tariffs on goods ranging from Argentine beef to German cars, creating one of the world’s largest free trade zones and making shopping cheaper for more than 700 million consumers.
France, Europe’s major agricultural producer, wanted stronger protections for farmers and has sought to delay the pact.
However German Chancellor Friedrich Merz called the vote to delay “regrettable” and has urged provisional application of the agreement.
Ratification is considered all but guaranteed in South America, where the agreement has broad support.
Mercosur consists of the region’s two biggest economies, Argentina and Brazil, as well as Paraguay and Uruguay. Bolivia, the bloc’s newest member, is not included the trade deal, but could join in the coming years. Venezuela has been suspended from the bloc and is not included in the agreement.
Copyright 2026 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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UK inflation rises to 3.4% in December, above forecasts
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A shopper browses fruit and vegetables for sale at an indoor market in Sheffield, UK. The OECD recently predicted that the UK will experience the highest inflation among all advanced economies this year.
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The U.K. inflation rate rose to 3.4% in December, above forecasts of 3.3% from economists polled by Reuters.
The inflation rate had cooled sharply to 3.2% in the twelve months of November, with the data encouraging the Bank of England to cut interest rates at its final meeting of the year last month.
Core inflation, excluding energy, food, alcohol, and tobacco, stood at 3.2% in December, unchanged from November, according to the latest figures from the Office for National Statistics.
“Inflation ticked up a little in December, driven partly by higher tobacco prices, following recently-introduced excise duty increases,” the ONS’ Chief Economist Grant Fitzner commented on X Wednesday.
“Airfares also contributed to the increase with prices rising more than a year ago, likely because of the timing of return flights over the Christmas and New Year period. Rising food costs, particularly for bread and cereals, were also an upward driver,” he added.
These increases were partially offset by a fall in rents inflation and lower prices for a range of recreational and cultural purchases, the ONS noted.
Pound sterling was largely flat against the dollar following the data, at $1.3231.
Chancellor Rachel Reeves told CNBC Wednesday that the Bank of England had expected inflation to rise slightly before it’s expected to cool into spring and summer, toward the central bank’s 2% target.
“That continues to be their expectation and that continues to be my expectation, and that’s going to happen because of the measures I took in my budget last year,” she told CNBC at the World Economic Forum in Davos, Switzerland.
The figures, coming after employment data on Monday which showed further cooling in the labor market, still raise doubts over whether the BOE will proceed with its expected February rate cut, or could hold off a little longer, however.
“A small monthly rise in prices is unlikely to concern policymakers at the Bank of England in the short-term, especially as pay growth continues on a downwards trajectory,” Scott Gardner, investment strategist at J.P. Morgan Personal Investing, said in emailed comments Wednesday.
“If pay growth continues to fall and this is reflected in inflation data, it could place pressure on the Bank of England to cut interest rates faster than expected. Markets are currently pricing in one to two cuts this year but this could change as inflation data for 2026 starts coming through,” he said.
Matthew Ryan, head of Market Strategy at Ebury, said he expects the BOE to remain on hold for at least the next couple of meetings.
“The hawks on the committee have long emphasised upside risks to U.K. inflation, but these arguments are losing steam amid the deteriorating employment picture and the moderation in wage pressures,” he noted Tuesday.
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