UK inflation fell more than expected in November to its lowest level in eight months, driven by a slowdown in food prices and Black Friday discounts, strengthening the case for a Bank of England interest rate cut this Thursday. The Office for National Statistics reported the consumer prices index dropped to 3.2% from 3.6% in October, below the 3.5% forecast by economists.
The decline was fuelled by falling pre-Christmas food prices, with the annual rate of food and drink inflation slowing from 4.9% to 4.2%. Grant Fitzner, the ONS chief economist, said: “Lower food prices, which traditionally rise at this time of the year, were the main driver of the fall, with decreases seen particularly for cakes, biscuits, and breakfast cereals.” Tobacco prices and women’s clothing also contributed.
Core inflation, which excludes volatile items like energy and food, cooled from 3.4% to 3.2%. Analysts said a quarter-point cut in the base rate from 4% was almost certain, with financial markets pricing in a more than 90% chance. The pound fell 0.7% against the dollar. James Smith of ING said: “November’s drop in UK inflation is just the latest sign that price pressures are abating and that the Bank of England has more work to do.”
Chancellor Rachel Reeves said: “Getting bills down is my top priority. I know families across Britain who are worried about bills will welcome this fall in inflation.” However, shadow chancellor Mel Stride warned prices were still rising well above the 2% target. Chris Belfield of the Joseph Rowntree Foundation said 7 million households headed into Christmas unable to afford essential items, with unemployment rising and real earnings barely growing.
Big price drops compared to a year earlier included olive oil (16.2%), flour and cereals (6.1%), and pasta (4.2%). The Bank of England expects Reeves’s autumn budget measures to cut headline inflation by up to half a percentage point next year.
