UK inflation dropped more than anticipated to 3.2% in November, marking an eight-month low compared to the 3.6% recorded in October. Economists had forecasted a decrease to 3.5%. The Office for National Statistics (ONS) reports monthly inflation data, attributing the recent decline primarily to reduced food prices.
Food inflation decreased from 4.9% in October to 4.2% in November. Additionally, lower tobacco prices and women’s clothing costs contributed to the overall decrease in inflation, although raw material expenses for businesses continued to rise. Core inflation, excluding volatile food and energy costs, also saw a larger-than-expected decline from 3.4% to 3.2%.
This update on inflation coincides with the upcoming Bank of England interest rate announcement, where most economists predict a reduction from 4% to 3.75%. The Bank of England’s inflation target stands at 2%.
Rachel Reeves, the Chancellor, expressed support for the inflation decline, emphasizing the importance of reducing bills for families. She highlighted measures taken, such as freezing rail fares and prescription fees and cutting energy bills, to alleviate financial burdens. The Bank of England anticipates a faster decrease in inflation next year as a result of these efforts.
Inflation serves as a metric for price fluctuations, illustrating how the cost of goods and services changes over time. While lower inflation indicates a slower rate of price increases, prices continue to rise. The ONS calculates inflation based on a basket of goods and services representative of household purchases, with the headline inflation figure serving as an average representation.
The Bank of England aims for 2% inflation and had adjusted interest rates to influence inflation levels. Higher interest rates make borrowing more expensive, curbing spending and reducing demand, ultimately lowering prices and inflation. Despite earlier rate increases, the current base rate stands at 4%, down from a peak of 5.25% in August 2023.
Inflation surged to 11.1% in October 2022 due to escalating energy and food costs. Factors such as increased energy demand post-Covid and the impact of the Russian invasion of Ukraine contributed to the inflation spike. After reaching a three-year low of 1.7% in September 2024, inflation began to climb again in October 2024.
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