UK records lowest inflation in over two years as prices dip
Official data released on Wednesday revealed that British inflation has plummeted to its lowest level in over two years, standing at 3.9 percent in November compared to the previous month’s 4.6 percent. The significant drop is attributed to falling petrol prices, providing relief amid a cost-of-living crisis following aggressive interest-rate hikes.
The Consumer Prices Index’s latest figure marks the weakest rate since September 2021, according to the Office of National Statistics. The positive development comes as a boost for Conservative Prime Minister Rishi Sunak, who had already achieved his target of bringing inflation below five percent in October.
Finance minister Jeremy Hunt acknowledged the improvement but acknowledged the ongoing struggle for Britons facing high consumer prices. Hunt stated, “With inflation more than halved, we are starting to remove inflationary pressures from the economy. We are back on the path to healthy, sustainable growth. But many families are still struggling with high prices, so we will continue to prioritize measures that help with cost-of-living pressures.”
Despite the November figure being a sharper slowdown than expected, the inflation rate remains almost double the Bank of England’s official target of 2.0 percent. ONS chief economist Grant Fitzner noted, “Inflation eased again to its lowest annual rate for over two years, but prices remain substantially above what they were before the invasion of Ukraine.”
This news follows the Bank of England’s decision to freeze its key interest rate at a 15-year peak of 5.25 percent, emphasizing its commitment to tackling persistently high consumer prices. While speculation arises about potential interest rate cuts in the coming year, core inflation, excluding food and energy costs, only slightly eased to 5.2 percent in November from 5.6 percent in October.
Deloitte senior economist Debapratim De commented on the unexpected fall in inflation, stating, “The sharper-than-expected fall in inflation in November is good news, pointing to a continued easing in price pressures.” However, he cautioned that measures of underlying pricing strength, such as core and services inflation, still remain at elevated levels.
The Bank of England maintains a relatively hawkish stance on interest rates, emphasizing the need for “restrictive” monetary policy to bring inflation back to its target level. Governor Andrew Bailey cautioned that there is “still some way to go” in policymakers’ efforts to dampen inflationary pressures.
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