UK inflation eased more sharply than expected in November, reaching its lowest level in ten months and raising the likelihood of a fourth interest rate cut by the Bank of England this year.
Data from the Office for National Statistics (ONS) showed that the consumer price index (CPI) rose 3.2 per cent in the year to November, down from 3.6 per cent in October. The figure was below the Bank of England’s forecast of 3.4 per cent and below City economists’ expectations of 3.5 per cent, marking the lowest annual inflation rate since March.
Core inflation, which excludes volatile food and energy costs, also eased, falling from 3.4 per cent to 3.2 per cent. On a monthly basis, consumer prices fell 0.2 per cent between October and November, signalling a renewed period of disinflation.
The ONS said lower food prices were the biggest contributor to the slowdown. Monthly food costs fell 0.2 per cent, unusual for a period when prices typically rise, while annual food inflation eased from 4.9 per cent to 4.2 per cent. Alcohol and tobacco prices also dropped sharply, with annual inflation for these products falling from 5.9 per cent to 4 per cent.
Clothing prices weighed further on inflation, with annual growth turning negative at minus 0.6 per cent. Combined with easing price pressures across other consumer sectors, these declines helped pull overall inflation below forecasts.
Grant Fitzner, chief economist at the ONS, said the fall in November was broad-based. “Lower food prices, particularly for cakes, biscuits, and breakfast cereals, were the main driver of the fall,” he said. “Tobacco prices also eased slightly this month following last year’s large increase, and the fall in women’s clothing prices contributed to the lower rate.”
The data strengthens expectations that the Bank of England will vote to reduce its base rate from 4 per cent to 3.75 per cent when the Monetary Policy Committee meets on Thursday. Economists and traders are forecasting a narrow decision in favour of a cut, following a series of indicators pointing to a cooling economy.
Earlier in the week, official statistics showed rising unemployment and a weakening labour market, alongside slowing wage growth. These developments reduce inflationary pressures and support the case for looser monetary policy.
Lower interest rates would provide relief to households and businesses by reducing borrowing costs, at a time when economic growth remains fragile and consumer confidence subdued. Analysts suggest that a cut could help support spending and investment while easing financial pressure on households still adjusting to higher living costs earlier in the year.
