UK Inflation Falls to 3.2% in November, Boosting Prospects for Bank of England Rate Cut
UK consumer price inflation (CPI) fell to 3.2% in November from 3.6% in October, marking the lowest rate in eight months. This decline supports expectations of a Bank of England base rate cut at its upcoming meeting. The Bank's base rate currently stands at 4%, with markets indicating around a 90% probability of a 25 basis point cut on Thursday. Analysts consider the cut almost certain.
Food and drink inflation slowed to 4.2% in November from 4.9% in October, driven by declines in prices of cakes, biscuits, and breakfast cereals amid pre-Christmas discounts and Black Friday promotions. Some food items recorded sharp year-on-year price decreases: olive oil prices dropped 16.2%, flours and cereals 6.1%, and pasta products and couscous 4.2%. Core inflation eased from 3.4% to 3.2%.
Chancellor Rachel Reeves noted that upcoming cost-of-living measures, including relief for energy bills, prescription charges, and fuel duty, could reduce headline inflation by up to 0.5 percentage points next year. Despite this, inflation remains above the government's 2% target. Economists warn that ongoing inflation pressures may limit the scope for further rate cuts in 2026.
Additionally, unemployment is rising back toward pre-pandemic levels, while campaigners highlight that around 7 million households currently cannot afford essential items. Sterling weakened approximately 0.7% against the dollar following the inflation report, and government borrowing costs fell.
