- CPI fell to 3.2% in November
- Lower food prices primarily behind the fall, though service sector inflation remains high at 4.4%
- Today’s data still expected to give Bank of England rate setters the final push to deliver a December cut
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK inflation figures:
“As Christmas gifts go, this is a most welcome one. It’s the time of year when people put a few more things in their supermarket trolley, so news that food and alcohol inflation has fallen will be a boon for cash strapped families.
“Inflation has proved stubbornly resilient over the course of the year but there are signs that we’ve scaled the sneaky second peak. Although 3.2% is still way above the Bank of England’s target, it is expected to be the final piece in the puzzle which will enable rate setters to deliver their own festive gift to borrowers with an interest rate cut on Thursday.
“Service sector inflation will certainly be an area of concern, with the cost of eating and staying out elevated as businesses attempt to deal with last year’s Budget measures which increased labour costs.
“Whilst the energy price cap will nudge up a tiny bit in January, the price help for households announced in this year’s Budget should provide a significant counterweight, and rising unemployment is already a factor keeping pay rises at a more subdued level.
“There are still massive question marks about what 2026 will bring and markets don’t expect the Bank of England to cut interest rates more than once or twice over the next year, so borrowers hoping to see a return to the ultra-low levels many people had become used to will have to adapt.
“What we must remember is that falling inflation doesn’t mean the cost of living is getting cheaper, and many households are still reeling from the impact of the mega price hikes we’ve endured over the past few years. But the bigger than expected fall in headline CPI is good news and will help boost people’s spending power and confidence. And with so much of the UK economy reliant on household spend, it could also signal better news for the UK’s flatlining growth."
