UK Inflation Falls to 3.2% in November, Strengthening Case for Bank of England Interest Rate Cut
UK Consumer Price Index (CPI) inflation fell to 3.2% year-on-year in November, down from 3.6% in October, representing a larger decline than economists had forecast, who expected a 3.5% reading. This data, provided by the Office for National Statistics (ONS), strengthens the case for the Bank of England to cut the base interest rate at its upcoming Monetary Policy Committee meeting. The market has priced about a 90% probability for a 25 basis-point cut, which would reduce the base rate from 4% to 3.75%.
The Bank of England's policy context includes concerns over weaker economic growth, rising unemployment, and easing inflationary pressures. The UK's economy contracted in October, partly due to slowing consumer spending ahead of tax changes and car manufacturing challenges following a cyber-attack on Jaguar Land Rover.
The Autumn Budget introduces £26 billion of tax increases, but relief on energy bills, prescriptions, and fuel duty could reduce headline inflation by up to 0.5 percentage points next year. Energy savings are expected to reduce household bills by about £150 annually, with suppliers like EDF passing these savings in full and Scottish Power committing to an April 1st implementation; other firms have also made similar commitments.
Inflation forecasts vary, with predictions ranging from 3.4% to 3.7%, with risks noted from airfares, food prices, and seasonal factors. Additionally, HM Revenue & Customs plans to stop sending physical letters from April, moving towards digital communications by 2028-29, with an opt-out option for paper letters. Starting in 2027, cryptocurrency firms will fall under new regulation by the Financial Conduct Authority (FCA) to improve oversight and standards.
