The UK’s latest inflation figures show a sharper-than-expected slowdown, offering a rare moment of relief for households and policymakers alike. Consumer Prices Index inflation fell to 3.2% in November, down from 3.6% in October, marking its lowest level since March and undershooting most economists’ forecasts, according to figures released by the Office for National Statistics on Wednesday. The decline was driven largely by falling food prices, particularly bread, cereals, dairy, and confectionery, as supermarkets engaged in intense pre‑Christmas competition. The pound fell 0.3% against the dollar to $1.339.
Consumer Prices Index inflation fell to 3.2% in November, down from 3.6% in October, marking its lowest level since March and undershooting most economists’ forecasts, according to figures released by the Office for National Statistics on Wednesday.
Against this backdrop, the Bank of England cut its base rate from 4% to 3.75% on Thursday, its sixth reduction since last summer and the lowest level since early 2023. The Monetary Policy Committee voted 5–4 in favour of the cut, with Governor Andrew Bailey shifting from last month’s preference to hold rates steady. The decision reflects growing confidence that inflation is on a sustained downward path, supported by this week’s unexpectedly soft CPI reading. However, the Bank signalled that while further cuts are possible, the path ahead will be gradual and data‑dependent.
Expectations around UK monetary policy have firmed in recent days, with markets now pricing in a very high likelihood of a 0.25 percentage point rate cut next week.
Meanwhile, the European Central Bank opted to hold interest rates steady for the fourth consecutive meeting, keeping its key deposit rate at 2%. With eurozone inflation stabilising around the ECB’s 2% target and growth proving more resilient than expected, helped by stronger exports and steady domestic spending, policymakers see little urgency to adjust policy.
Our specialist's final thought
"Updated staff projections point to stable inflation and modest growth over the coming years, reinforcing President Christine Lagarde’s message that any future moves will depend on incoming data. The euro barely reacted, trading flat against the dollar at $1.174 by late afternoon."
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