The Office for National Statistics (ONS) has released welcome news as UK inflation falls to 3.2% in the year to November. This is a bigger drop than was expected from the previous rate of 3.6%, with economists having predicted 3.5%. Inflation now stands at the lowest rate it’s been in 8 months.
What led to the fall in inflation?
The main factor behind the drop in inflation has been due to lower food prices. Generally, at this time of year, food prices increase; however, this year, food prices have dipped. In particular, this was the case for cakes, breakfast cereals and biscuits.
Alcohol and tobacco prices have also dropped significantly from 5.9% in the year to October to 4%. This is the lowest rate in almost 3 years.
Clothes and footwear, especially women’s clothing, have seen a drop in prices. This was partly due to discounts offered in Black Friday sales.
The drop to 3.2% is good news but it still shows that inflation is rising. The lower figure simply means that prices are increasing at a slower rate than before. It is still significantly higher than the Bank of England’s 2% target.
Although some factors that led to the fall in inflation, such as clothing being affected by Black Friday discounts, are likely to see clothing and footwear prices rise again, measures announced in the Autumn Budget should start to have an impact. These, in turn, should help to bring inflation down in the early part of 2026.
As UK inflation falls, will interest rates follow?
The release of the latest inflation rate figure comes a day ahead of the next base rate review by the Monetary Policy Committee (MPC). Currently standing at 4%, the base rate is now expected to benefit from a pre-Christmas cut.
It has been held at 4% following the last two reviews. The Bank of England has been clear that caution needs to be maintained before lowering interest rates, ensuring that inflation is under control first. However, this latest inflation rate was below the BoE’s prediction of 3.4% and economists have already predicted continued falls in inflation next year.
As such, the rate is expected to be cut by 0.25% in the last MPC review of the year. This will bring the base rate down to 3.75%. There is now also speculation of a successive cut at the beginning of next year.
Get expert mortgage advice from our brokers
If you’re thinking about buying your first property, remortgaging or investing in a new property, find out what mortgage options are available for you. Our friendly brokers are here to find the best deals for you, not just in cost but in flexibility, with a mortgage solution that is tailored to your needs. Give us a call on 01322 907 000 to speak with one of our brokers today.