UK inflation decreased more than anticipated to 3.2% in November, marking its lowest point in eight months, down from 3.6% in October. Economists had projected a decline to 3.5%. The Office for National Statistics (ONS) attributes the drop to reduced food prices, with food inflation easing from 4.9% in October to 4.2% in November. Additionally, lower tobacco prices and women’s clothing costs contributed to the decrease, while raw material costs for businesses continued to rise.

Core inflation, excluding volatile food and energy costs, also saw a larger-than-expected drop from 3.4% to 3.2%. This data was released just ahead of the Bank of England’s upcoming interest rates announcement, where a majority of economists anticipate a reduction from 4% to 3.75%. The Bank of England’s inflation target stands at 2%.

Chancellor Rachel Reeves expressed optimism about the inflation decline, mentioning efforts to alleviate financial burdens on families. Inflation serves as a measure of price escalation, reflecting the change in the cost of goods and services over time. The ONS calculates inflation based on a basket of goods and services regularly updated to mirror consumer spending habits.

The Bank of England has aimed to maintain 2% inflation by adjusting interest rates. In response to rising inflation, interest rates had been incrementally increased over nearly two years. However, this led to heightened mortgage payments for homeowners. With the base rate currently at 4%, down from a peak of 5.25% in August 2023, inflation peaked at 11.1% in October 2022 due to elevated energy and food costs.

Inflation saw a three-year low of 1.7% in September 2024 but began to rise again in October of the same year. This fluctuation was influenced by increased energy demand post-Covid, exacerbated by the Ukraine conflict, which also impacted food prices.