UK inflation rate fell to 3.2 in November

Shoppers walk past the shops on Regent Street in London on December 22, 2023, the last working day before Christmas.

Henry Nichols | AFP | Getty Images

British inflation cooled sharply to 3.2% in November, raising the possibility that the Bank of England will cut interest rates at its final meeting of the year on Thursday.

Economists polled by Reuters had expected inflation to be 3.5% in the 12 months to November, the lowest annual rate since March and down from 3.6% in October.

Core inflation, which excludes energy, food, alcohol and tobacco, also rose 3.2% in the year to November, down from 3.4% in October, according to the latest data from the Office for National Statistics.

Grant Fitzner, chief economist at the Office for National Statistics, commented on Wednesday that falling food prices, which typically rise in the run-up to Christmas, with particularly falling prices for cakes, biscuits and breakfast cereals, were the main factor behind the fall.

Weak UK inflation increases chances of Bank of England rate cut

“Tobacco prices have also helped bring prices down, with prices retreating slightly this month after rising sharply a year ago. Falling prices for women’s clothing are another driver of the decline,” Fitzner said in comments to X.

He added that while increases in the cost of goods leaving the factory have slowed, companies’ annual raw material costs continue to rise.

Chancellor of the Exchequer Rachel Reeves welcomed the drop in inflation but said “more needs to be done”.

“I know families across the UK worried about the cost of living will welcome the fall in inflation. But there is more to do,” she said on X.

Christmas rate cut

Data released on Tuesday showed that Britain’s unemployment rate rose to 5.1%, which may encourage the Bank of England’s nine-member Monetary Policy Committee (MPC) to cut the benchmark interest rate by 25 basis points to 3.75% at its meeting on Thursday.

However, economists expect the Bank’s Monetary Policy Committee to vote 5-4, with Bank of England Governor Andrew Bailey expected to be the swing vote in favor of a rate cut.

British economic growth remains at a low level, the economy is barely holding on Growth was only 0.1% in the third quarterAccording to the latest data, there are signs that unemployment may be rising.

Suren Thiru, ICAEW economic director, said after the release of the inflation data: “These data, coupled with the recent spate of pessimistic data, mean that a rate cut tomorrow seems to be a certainty.”

“While the fiscal constraints faced by households and businesses remain severe, these figures provide reassurance that the UK is moving towards a more benign inflationary environment, helped by falling food prices,” he said in emailed comments.