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UK inflation dropped more sharply than anticipated in November as food price pressures eased, bolstering expectations that the Bank of England will cut interest rates this week, according to official data.
Figures from the Office for National Statistics showed consumer price inflation fell to 3.2% last month, down from 3.6% in October. Economists had predicted a smaller decline to 3.5%. The latest figure marks the lowest annual inflation rate since March.
Grant Fitzner, chief economist at the ONS, said falling food prices were the main factor behind the decline, noting that prices for items such as cakes, biscuits and breakfast cereals fell despite typically rising at this time of year. Tobacco prices also contributed after easing slightly following a sharp increase a year earlier, while lower women’s clothing prices added further downward pressure.
The data comes at a critical moment for the UK economy, with the Bank of England widely expected to lower its base rate on Thursday amid slowing growth, rising unemployment and easing inflation. Financial markets were already pricing in a 90% chance of a quarter-point cut before the inflation figures were released.
Food and drink inflation slowed to 4.2% in November from 4.9% the previous month, reflecting year-on-year price declines in several staple products. Core inflation, which strips out volatile items such as food and energy and is closely watched by policymakers, also eased from 3.4% to 3.2%.
Chancellor Rachel Reeves, who made tackling the cost of living a central aim of last month’s autumn budget, welcomed the data. The budget included £26bn in tax rises aimed at repairing public finances and funding the removal of the two-child benefit cap.
The Bank of England has previously indicated that measures announced by the chancellor — including support for energy bills, prescription charges and fuel duty — could reduce headline inflation by up to half a percentage point next year.
“Getting bills down is my top priority,” Reeves said, adding that families concerned about rising costs would welcome the latest fall in inflation.
The case for a rate cut has been further strengthened by signs of a cooling labour market and data showing the economy unexpectedly contracted in October, as households curtailed spending ahead of the budget. Car production was also hit by a cyber-attack affecting Jaguar Land Rover.
Economists said seasonal discounts linked to Black Friday and the run-up to Christmas may also have helped push inflation lower, with price cuts seen across meat products, clothing, footwear and furniture.
Paul Dales, chief UK economist at Capital Economics, said the sharp fall in inflation was likely to be enough to prompt the Bank of England to deliver an early Christmas boost to borrowers by cutting interest rates from 4% to 3.75%.
