In a welcome development for household budgets, the rate of inflation in the United Kingdom has fallen more sharply than predicted, hitting an eight-month low in November.
A Sharper Than Expected Decline
The Consumer Prices Index (CPI) measure of inflation dropped to 3.2% in the year to November, down from 3.6% in October. This marks the lowest annual rate since March 2025 and surprised financial markets, where a decrease to only 3.5% had been widely forecast.
The Office for National Statistics (ONS), which publishes the monthly figures, highlighted that the easing was primarily driven by slowing food price inflation. The annual rate for food prices decelerated from 4.9% in October to 4.2% in November.
Grant Fitzner, chief economist at the ONS, explained: "Inflation fell notably in November to its lowest annual rate since March. Lower food prices, which traditionally rise at this time of year, were the main driver of the fall." He specifically noted decreases in the cost of items like cakes, biscuits, and breakfast cereals.
Core Inflation and Contributing Factors
The core inflation rate, which strips out volatile elements like energy and food, also saw a larger-than-anticipated drop, falling from 3.4% to 3.2%. This indicates that the easing of price pressures is becoming more broad-based.
Beyond food, the ONS reported that lower tobacco prices and a fall in the cost of women's clothing helped pull the overall rate down. However, it wasn't all good news for businesses, as the annual cost of raw materials continued to climb, albeit at a slower pace for goods leaving factories.
Implications for Interest Rates and Households
This crucial inflation data landed just one day before the Bank of England's final interest rate decision of the year. Most economists now expect the Monetary Policy Committee to respond by cutting the base rate from 4% to 3.75% on Thursday.
The Bank has a mandate to return inflation to its target of 2%. It had previously raised interest rates aggressively to cool demand and bring prices under control. While higher rates help curb inflation, they have also increased mortgage costs for millions, squeezing disposable income.
Chancellor Rachel Reeves welcomed the news, stating: "I know families across Britain who are worried about bills will welcome this fall in inflation. Getting bills down is my top priority." She referenced recent government measures such as freezing rail fares and prescription fees, and cutting energy bills.
Understanding the Inflation Landscape
It is important to remember that a fall in inflation does not mean prices are decreasing; it means they are rising at a slower pace. The current 3.2% rate is a significant improvement from the peak of 11.1% recorded in October 2022, a period driven by soaring energy and food costs following the pandemic and the war in Ukraine.
Inflation had dipped as low as 1.7% in September 2024 before ticking up again, demonstrating that the path back to the 2% target can be uneven. The Bank of England will be closely monitoring whether November's encouraging drop marks the beginning of a sustained downward trend.
