UK inflation fell by more than expected in November to the lowest level in eight months amid a slowdown in food prices, clearing the way for the Bank of England to cut interest rates on Thursday.
In a crunch week for the economy, the Office for National Statistics said the rate as measured by the consumer prices index eased to 3.2% last month from a reading of 3.6% in October. City economists had forecast a modest drop to 3.5%.
Strengthening the case for the Bank to cut borrowing costs for a sixth time, the slowdown in the headline rate to the lowest level since March was fuelled by falling pre-Christmas food prices and Black Friday discounts.
Grant Fitzner, the ONS chief economist, said: “Lower food prices, which traditionally rise at this time of the year, were the main driver of the fall, with decreases seen particularly for cakes, biscuits, and breakfast cereals.
“Tobacco prices also helped pull the rate down, with prices easing slightly this month after a large rise a year ago. The fall in the price of women’s clothing was another downward driver.”
Analysts said a cut in the Bank’s base rate was “all-but nailed on” before its policymakers meeting on Thursday, as faltering economic growth and rising levels of unemployment bear down on inflationary pressures.
“November’s drop in UK inflation is just the latest sign that price pressures are abating and that the Bank of England has more work to do. We expect a rate cut on Thursday and two more next year,” said James Smith, the developed markets economist at ING.
The pound fell by 0.7% against the dollar on the currency markets. Trading in financial markets reflects a more than 90% chance of a quarter-point cut in the base rate from the current level of 4%. Government borrowing costs also fell.
The latest reading showed inflation in food and drink prices slowed from 4.9% in October to 4.2%, with the cost of products such as cakes, biscuits and breakfast cereals falling this year after rising a year ago.
Kris Hamer, the director of insight at the British Retail Consortium, said extensive discounting across Black Friday month had contributed to the decline, alongside big pre-Christmas promotions. “As a result, there were deals to be had, with bigger discounts seen for some meat products such as pork, lamb and chicken.”
The price of some food products tumbled sharply compared with a year earlier, including a 16.2% drop in olive oil, a 6.1% decline in flours and other cereals, and a 4.2% drop in the price of pasta products and couscous.
Further strengthening the case for a rate cut, core inflation – which excludes volatile items including energy and food, and is closely monitored by the Bank – also cooled from 3.4% to 3.2%.
The chancellor, Rachel Reeves, made tackling the cost of living a major target of last month’s autumn budget, alongside £26bn of tax increases to help repair the public finances and fund the end of the two-child benefit cap.
The Bank has said it expects the chancellor’s measures – including relief on energy bills, prescription charges and fuel duty – could cut headline inflation by as much as half a percentage point next year.
“Getting bills down is my top priority,” Reeves said. “I know families across Britain who are worried about bills will welcome this fall in inflation.”
Despite the slowdown in November, the UK’s headline inflation rate remains significantly above the 2% target set by the government. Some economists warned that the UK still faced pressures from inflation that could limit the Bank from cutting interest rates much further in 2026.
Mel Stride, the shadow chancellor, said: “While a fall in inflation is welcome, prices are still rising at well above the target rate, which will be deeply concerning for families.”
Campaigners said consumer prices remained significantly higher than in 2021, before the inflation shock took hold. Chris Belfield, the chief economist at the Joseph Rowntree Foundation poverty charity, said 7 million households were heading into Christmas unable to afford essential items.
“Meanwhile, more people are looking for work with unemployment figures up to pre-pandemic levels and real earnings are barely growing.”
