London: Britain’s headline inflation rate eased more sharply than anticipated in November, official figures released on Wednesday showed, delivering a noteworthy development just before the Bank of England (BoE) convenes for a critical interest rate decision this week. The annual Consumer Price Index (CPI) climbed 3.2% in November, down from 3.6% in October, marking the lowest pace of price growth in several months and well below market expectations.
The unexpected deceleration stronger than the median City forecast of a 3.5% rate has heightened expectations among investors that the BoE could cut its key interest rate when it announces policy later this week. Financial markets have already priced in more than a 90% probability of a 0.25 percentage point reduction, likely bringing the Bank Rate down from 4% to 3.75%.
“We see the inflation trend moving in the right direction,” said one economist, noting that lower food and energy price contributions helped drag headline CPI downward. Although inflation remains above the BoE’s formal target of 2%, the latest figures provide policymakers some breathing room as they weigh the trade-offs between curbing price pressures and supporting a slowing economy.
The UK’s inflation journey over recent months has been marked by volatility. After peaking at historically elevated levels in past years driven by global supply disruptions, energy cost spikes, and post-pandemic demand pressures price growth has gradually moderated. October’s figure of 3.6% was the first meaningful decline in months, and November’s further drop to 3.2% signals that the disinflation trend is solidifying.
Core inflation, which excludes volatile items such as food and energy, also eased in November, a sign that underlying price pressures may be receding more broadly across the economy.
Nevertheless, Britain’s rate of inflation remains high relative to many advanced economies, posing a continuing challenge for the BoE as it balances its dual mandate of price stability and broader economic support.
The timing of Wednesday’s inflation data just a day before the Bank of England’s policy decision makes it particularly influential. According to analysts and a Reuters poll of economists, the BoE’s nine-member Monetary Policy Committee (MPC) is expected to be sharply divided on the next move, potentially resulting in a narrow 5–4 vote in favor of a rate cut. Governor Andrew Bailey, who previously opposed reductions, has signaled he may shift his position if evidence of sustained disinflation continues.
A rate cut to 3.75% would represent the first reduction in several months and take borrowing costs to their lowest level in nearly three years. Such a move is being widely anticipated as the UK economy shows signs of fragility, including softer consumer demand and labor market shifts.
Beyond inflation, other economic indicators present a mixed picture. The UK has seen an uptick in unemployment in recent months, with the jobless rate reaching its highest level since early 2021, adding pressure on the BoE to provide relief through easier monetary conditions.
Meanwhile, a Bank of England survey released earlier this week indicated that public expectations for inflation over the coming year have eased marginally a key sentiment measure that policymakers track closely for embedded inflation expectations.
Economists caution that while the recent inflation slowdown is welcome news, structural issues such as elevated service sector price pressures and ongoing cost-of-living strains on households continue to temper optimism about a rapid return to the BoE’s 2% target.
As markets await Thursday’s policy announcement, investors and analysts will be scanning for commentary from the Bank of England on its future outlook. Should the BoE opt to cut rates, attention will quickly pivot to how it plans to navigate the delicate balance between sustaining economic growth and anchoring inflation expectations, especially against a backdrop of global uncertainty and domestic fiscal challenges. In essence, the latest inflation data has not only shaped immediate market expectations but could set the tone for UK monetary policy well into 2026.