UK Inflation Falls to Lowest in Eight Months Amid Expectations of Bank of England Rate Cut
The UK experienced a notable decrease in inflation in November, with the Consumer Price Index (CPI) falling to 3.2% from 3.6% in October, marking the lowest inflation rate in eight months and below economists' forecasts of 3.5%, according to the Office for National Statistics (ONS).
Food and drink inflation slowed notably to 4.2% in November, helped by pre-Christmas discounts and Black Friday promotions. Specific sectors such as cakes, biscuits, and breakfast cereals saw price declines, contributing to the overall reduction. Some food items experienced annual price drops, including olive oil (-16.2%), flours and other cereals (-6.1%), and pasta products and couscous (-4.2%). Core inflation, which excludes energy and food, also eased from 3.4% to 3.2%.
Following the data release, the sterling fell approximately 0.7% against the dollar, and government debt costs decreased. Markets are now pricing in a high likelihood of a 0.25 percentage point cut to the Bank of England's base rate, which currently stands at 4%.
Chancellor Rachel Reeves highlighted that ongoing cost-of-living relief measures, such as energy bill relief, prescription charges, and reductions in fuel duty, could reduce headline inflation by up to 0.5 percentage points next year. However, despite the recent declines, inflation remains above the target rate of 2%. Economists caution that further interest rate cuts in 2026 may be limited due to persistent inflationary pressures and rising unemployment approaching pre-pandemic levels.
Campaigners have emphasized that around 7 million households are currently unable to afford essential items amid ongoing cost-of-living challenges.
