Scottish economic bulletin: February 2026

Inflation

The inflation rate rose to 3.4% in December, up from 3.2% in November, however is forecast to fall to around 2% in April.

• The inflation rate increased slightly in December, from 3.2% to 3.4%, however is expected to fall again in the coming months and return to around 2% during the first half of this year.
• The increase in inflation in December saw increases in the rates of inflation for food and non‑alcoholic beverages (4.5%, up from 4.2%), alcohol and tobacco (5.2%, up from 4.0%), and transport (4%, up from 3.7%). Core inflation (excluding energy, food, alcohol and tobacco) remained unchanged at 3.2% in December and has eased back from 3.8% in August.^[3]
• More broadly, the inflation rate of goods prices rose from 2.1% to 2.2%, while services prices inflation also increased slightly from 4.4% to 4.5%. Despite the pick-up in service price inflation, it remains lower than its recent peak of 5.4% in April 2025.

• The Bank of England forecast inflation to fall from its current rate of 3.4% to around 3% in the next few months and then to the 2% target rate in April this year, partly reflecting UK Budget announcements on administered prices and indirect taxes.^[4]

• In February, the Bank’s Monetary Policy Committee (MPC) held the Bank Rate at 3.75%, judging that while inflation is expected to fall in the coming months, there remain medium term risks from elevated inflation expectations and the pace at which lower inflation might feed through to wage and price setting. The Bank set out that based on the current evidence, the Bank Rate is likely to be reduced further and markets currently expect it to fall by 0.5 percentage points during the year.^[5]