UK inflation dropped more than anticipated to 3.2% in November, marking an eight-month low. This decrease contrasts with the 3.6% recorded in October. Economists had largely forecasted a decline to 3.5%.
The Office for National Statistics (ONS) reports monthly inflation data to track changes in the prices of goods and services. The recent decline was primarily driven by lower food prices. Food inflation eased from 4.9% in October to 4.2% in November. Additionally, tobacco prices and women’s clothing costs contributed to reducing inflation, while raw material costs for businesses continued to rise.
Core inflation, excluding volatile food and energy costs, also saw a larger-than-expected decrease from 3.4% to 3.2%. The update on inflation comes just ahead of the Bank of England’s final interest rate announcement of the year, with most economists predicting a cut from 4% to 3.75%. The Bank of England targets 2% inflation.
Grant Fitzner, ONS Chief Economist, noted that lower food prices were a key driver behind the notable decline in inflation. He also mentioned the slight easing of tobacco prices and the drop in women’s clothing prices. While the cost of goods leaving factories increased at a slower rate due to lower food inflation, raw material costs for businesses continued to climb.
Chancellor Rachel Reeves expressed that families concerned about bills would welcome the inflation drop. She highlighted efforts to reduce costs, such as freezing rail fares and prescription fees and cutting average energy bills by £150 in this year’s Budget. The Bank of England expects these measures to help lower prices and accelerate the decline in inflation next year.
Inflation serves as a measure of price increases, indicating how the prices of goods have changed over time. While lower inflation suggests slower price increases, prices continue to rise. The ONS calculates inflation based on a basket of goods and services regularly updated to reflect consumer spending patterns.
The Bank of England aims for 2% inflation and adjusts interest rates to control inflation levels. Higher interest rates make borrowing costlier, leading to reduced spending, lower demand, and ultimately lower inflation. The base rate currently stands at 4%, following multiple rate cuts from a peak of 5.25% in August 2023.
Inflation surged to 11.1% in October 2022, driven by increased energy and food costs. The demand for energy rose post-Covid and intensified with the Ukraine conflict, which also elevated food prices. In September 2024, inflation hit a three-year low at 1.7% but began to rise again in October 2024.