UK inflation dropped more than expected in November to the lowest level in eight months, bolstering expectations that the Bank of England will cut interest rates on Thursday. The Office for National Statistics reported the consumer prices index eased to 3.2% from 3.6% in October, below the 3.5% forecast by economists.
The decline was driven by a slowdown in food and drink price rises, from 4.9% to 4.2%, along with Black Friday discounts and lower tobacco costs. ONS chief economist Grant Fitzner noted that prices for cakes, biscuits and breakfast cereals fell, while women's clothing also contributed to the downward move.
Analysts see a rate cut as almost certain, with markets pricing in a more than 90% chance of a quarter-point reduction to 3.75%. The pound fell 0.7% against the dollar and government borrowing costs also decreased. James Smith of ING said: “November’s drop in UK inflation is just the latest sign that price pressures are abating.”
Core inflation, which excludes energy and food, also cooled from 3.4% to 3.2%. Chancellor Rachel Reeves welcomed the fall, saying: “Getting bills down is my top priority.” However, shadow chancellor Mel Stride cautioned that prices are still rising well above the 2% target. The Joseph Rowntree Foundation warned that 7 million households cannot afford essentials this Christmas.
