Inflation dropped far below market expectations in November, official data has shown, easing Bank of England doves’ nerves a day before their decision on whether to cut interest rates is revealed.
The Office for National Statistics (ONS) said inflation hit 3.2 per cent in the year to November, staying well above the Bank’s 2 per cent target but coming below market expectations.
The previous month’s figure for inflation was 3.6 per cent by comparison.
Core inflation, which excludes utility bills and food costs, was 3.2 per cent.
The main drivers of inflation on the month included items such as cakes, women’s clothing and tobacco prices, according to officials at the ONS.
“Inflation fell notably in November to its lowest annual rate since March,” said Grant Fitzner, chief economist at the ONS.
Today’s figures will be the final piece of economics news that Bank policymakers will see before they make their final vote of the year on monetary policy.
The Bank is facing intense pressure to lower borrowing costs to revive the UK’s fledgling jobs market, which saw the highest number of redundancies in the three months to September since the pandemic.
The latest set of figures also showed wage growth cooling slightly across the private sector to 3.9 per cent.
Inflation data to be considered by Bank
Economists on City AM‘s Shadow Monetary Policy Committee voted in favour of interest rates being cut by 25 basis points to 3.75 per cent.
Responding independently of her organisation, Anna Leach, the Institute of Directors’ chief economist, said falling inflation expectations and the probability of a hit to demand from lower inflation justified a rate cut.
“Although the inflation rate still sits well outside the target range, various measures are moving in the ‘right’ direction to support further rate cuts,” Leach said.
Dissenting economists Julian Jessop and former Bank rate-setter Jonathan Haskel warned that the Bank should look to focus on squeezing out all inflationary pressures.
The Bank’s MPC is widely expected to cut interest rates but there is some caution over what Governor Andrew Bailey’s next move may be.
Among those on the committee, Clare Lombardelli, Megan Greene, Catherine Mann and Huw Pill are predicted to vote to leave interest rates on hold.
Swati Dhingra, Alan Taylor, Sarah Breeden and Dave Ramsden are expected to vote in favour of a six cut in the cycle, which began in August 2024, making Bailey the outlier left to make the final call.