UK inflation fell by more than expected in November, strengthening the case for the Bank of England to cut interest rates this week, according to official data.
The Office for National Statistics said the consumer prices index dropped to 3.2%, its lowest level since March, down from 3.6% in October and below economists’ forecasts of 3.5%. The surprise decline triggered sharp market moves.
The FTSE 100 jumped 1.4%, putting it on course for its strongest session since April, helped by a weaker pound, which tends to benefit the index’s internationally focused companies. Sterling fell 0.7% against the dollar to $1.333, while government bond yields slid as traders priced in a rate cut.
Economists now expect the Bank of England to lower interest rates from 4% to 3.75% on Thursday, as policymakers respond to rising unemployment — now at a four-year high — and signs of slowing wage growth in the private sector.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said the data all but confirmed an imminent move. “These figures, alongside the recent run of weak economic data, mean an interest rate cut tomorrow looks certain,” he said.
Thomas Pugh, chief economist at RSM UK, agreed, saying the inflation print “effectively nails on a rate cut tomorrow”.
Inflation had been stuck at 3.8% between July and September, well above the Bank’s 2% target. The ONS said the latest fall was driven mainly by lower food prices, particularly for cakes, biscuits and breakfast cereals. Grant Fitzner, the ONS’s chief economist, added that easing tobacco prices and a drop in women’s clothing prices also helped pull inflation lower.
