UK inflation in November dropped to 3.2%, marking an eight-month low, a decrease from the 3.6% recorded in October. Economists had anticipated a decrease to 3.5%. The Office for National Statistics (ONS) attributes this decline mainly to lower food prices.
Food inflation decreased 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 decreased from 3.4% to 3.2%.
The Bank of England is set to announce its final interest rates update of the year, with a majority of economists predicting a cut from 4% to 3.75%. Chancellor Rachel Reeves praised the fall in inflation, emphasizing efforts to reduce costs for families through measures like freezing rail fares and prescription fees.
Inflation reflects price increases over time. Lower inflation does not mean prices have stopped rising but indicates a slower rate of increase. The ONS calculates inflation based on a basket of goods and services, with the headline figure serving as an average representation.
The Bank of England targets 2% inflation and has adjusted interest rates to influence inflation levels. Higher interest rates make borrowing costlier, reducing spending and demand, ultimately lowering inflation. In December 2021, the base rate was at 0.1%, having been cut from a peak of 5.25% in August 2023.
Inflation surged in 2021, peaking at 11.1% in October 2022, driven by increased energy and food costs. Energy demand rose post-Covid and was exacerbated by the Ukraine conflict, impacting food prices due to elevated expenses in fertilizers and animal feed. Inflation dipped to 1.7% in September 2024 but began rising again in October 2024.