Bigger than expected drop in inflation

UK inflation is continuing to slow down, with prices rising by 3.9% in the 12 months to November, down from 4.6% in October.

The decrease was steeper than had been forecast by analysts, taking inflation to its lowest level since September 2021.

Smaller price rises for food, fuel, household goods and recreation activities, together with a decrease in prices for raw materials, were behind the monthly figure, the Office for National Statistics (ONS) explained.

The cost of raw materials for manufacturing decreased for the sixth consecutive month as prices fell by 2.6%, unchanged from a drop of 2.6% in October.

“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,” said Grant Fitzner, chief economist at the ONS.

Food prices were up 9.2% in the year to November, easing for the eighth consecutive month from a high of 19.2% in March 2023 — the highest annual rate seen for over 45 years. Last month’s rate of food inflation was the lowest since May 2022 thanks to slowing price rises for bread and cereals as well as meat, milk, cheese and eggs, and soft drinks.

Overall inflation is still just under double the Bank of England’s 2% target and the central bank has said it is too early to consider cutting interest rates from the current level of 5.25%, a 15-year high.