UK inflation dropped more than anticipated to 3.2% in November, marking its lowest point in eight months, a decline from the 3.6% recorded in October. This represents the lowest annual inflation rate since March, with most analysts predicting a decrease to 3.5%.
The Office for National Statistics (ONS) releases monthly inflation data to track changes in the prices of goods and services. The latest figures attribute the decrease primarily to lower food prices, with food inflation easing from 4.9% in October to 4.2% in November. Additionally, tobacco prices and women’s clothing costs contributed to the reduction in inflation, although raw material costs for businesses continued to rise.
Core inflation, which excludes volatile food and energy prices, also saw a larger-than-expected decrease from 3.4% to 3.2%. The timing of this inflation update precedes the Bank of England’s upcoming interest rate announcement, with most economists predicting a reduction from 4% to 3.75%.
Chancellor Rachel Reeves expressed support for the decline in inflation, emphasizing efforts to alleviate financial burdens on families by freezing rail fares, prescription fees, and reducing energy bills at the Budget. The Bank of England expects these measures to contribute to a faster decline in inflation next year.
Inflation serves as a gauge for price fluctuations, where a 3% inflation rate would mean an item costing £1 last year would now cost £1.03. The ONS uses a “basket of goods” to calculate inflation, although the headline inflation figure represents an average, with individual prices potentially deviating from this figure.
To curb inflation, the Bank of England targets a 2% inflation rate and adjusts interest rates accordingly. Previously, interest rates were raised to combat rising inflation, reaching a peak of 5.25% in August 2023 before being reduced to the current level of 4%.
Inflation surged in 2021, peaking at 11.1% in October 2022 due to increased energy and food costs. The demand for energy rose post-Covid and was exacerbated by the conflict in Ukraine, leading to higher food prices. Following a decline to 1.7% in September 2024, inflation started to rise again in October 2024.
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