UK inflation dropped more than anticipated to 3.2% in November, marking its lowest point in eight months, compared to the 3.6% recorded in October. This decrease, the lowest annual inflation rate since March, was largely influenced by lower food prices, according to data from the Office for National Statistics (ONS).
In particular, food inflation eased from 4.9% in October to 4.2% in November, while tobacco prices and women’s clothing costs also contributed to the decline in inflation. However, raw material costs for businesses continued to rise.
Core inflation, which excludes volatile food and energy costs, also saw a larger-than-expected decline from 3.4% to 3.2%. The timing of this inflation update is significant as it precedes the Bank of England’s upcoming interest rates announcement, with most economists predicting a reduction from 4% to 3.75%.
Grant Fitzner, the chief economist at the ONS, explained that the drop in inflation was driven by lower food prices and slight decreases in tobacco prices and women’s clothing costs. He highlighted that factory goods’ cost increase slowed due to lower food inflation, while raw material expenses continued to rise.
Chancellor Rachel Reeves expressed satisfaction with the inflation decrease, emphasizing her commitment to reducing bills for families across the UK. She cited freezing rail fares and prescription fees, along with cutting energy bills at the Budget, as measures to alleviate financial burdens. The Bank of England also anticipates further declines in inflation next year as a result of these actions.
Inflation serves as a gauge of price fluctuations, where a 3% inflation rate indicates a £1 item from the previous year would now cost £1.03. Lower inflation does not signify a halt in price increases but rather a slower rate of ascent. The ONS calculates inflation based on a diverse “basket of goods” representing consumer spending habits.
The Bank of England targets 2% inflation and adjusts interest rates to manage inflation levels. Higher interest rates make borrowing costlier, curbing spending and demand to lower prices and inflation. The base rate, currently at 4%, has been adjusted from a peak of 5.25% in August 2023.
Inflation surged to 11.1% in October 2022, attributed to rising energy and food costs following increased energy demand post-Covid and the impact of the Ukraine conflict. After reaching a three-year low of 1.7% in September 2024, inflation began to rise again in October 2024.