UK inflation dropped to 3.2% in November, marking an eight-month low, down from the 3.6% recorded in October. Economists had forecasted a decrease to 3.5%. Inflation measures the change in prices of goods and services over time, with the Office for National Statistics attributing the decline mainly to lower food prices.
Food inflation decreased from 4.9% in October to 4.2% in November, while tobacco prices and women’s clothing costs also contributed to the overall drop in inflation. However, raw material costs for businesses continued to rise. Core inflation, excluding volatile food and energy costs, also fell from 3.4% to 3.2%.
The Bank of England is set to announce its final interest rate update of the year, with expectations that the base interest rate will be reduced from 4% to 3.75%. The Bank’s inflation target is 2%.
Chancellor Rachel Reeves expressed appreciation for the decrease in inflation, highlighting measures taken to reduce bills for British families. Lower inflation doesn’t mean prices have stopped rising, but rather that the rate of increase has slowed down. The ONS calculates inflation based on a basket of goods and services, representing household spending patterns.
The Bank of England targets a 2% inflation rate and had raised interest rates over nearly two years to combat inflation. Higher interest rates make borrowing costlier, reducing spending and demand, ultimately lowering prices and inflation. The base rate currently stands at 4%, down from a peak of 5.25% in August 2023.
Inflation surged to 11.1% in October 2022, driven by increased energy and food costs following the Covid pandemic and the conflict in Ukraine. In September 2024, inflation hit a three-year low at 1.7%, but started to rise again in October 2024.