UK (Parliament Politics Magazine) – UK annual inflation fell to 3.2% in November, driven by slower food price increases, adding pressure on the Bank of England to cut interest rates this week.
As reported by Richard Partington of The Guardian, official figures reveal that UK inflation eased more than forecast in November, driven by slower food price increases, which strengthens calls for a potential interest rate cut by the central bank on Thursday.
What did the ONS say about UK inflation falling to 3.2% in November?
The latest Office for National Statistics figures showed UK consumer price inflation eased to 3.4% last month, down from 3.6% in October, exceeding City economists’ forecast of 3.5%.
ONS chief economist Grant Fitzner pointed to falling costs of cakes, biscuits, and breakfast cereals.
He said,
“Inflation fell notably in November to its lowest annual rate since March. Lower food prices, which traditionally rise at this time of the year, were the main driver of the fall with decreases seen particularly for cakes, biscuits, and breakfast cereals.”
Mr Fitzner added,
“The fall in the price of women’s clothing was another downward driver. The increase in the cost of goods leaving factories slowed, driven by lower food inflation, while the annual cost of raw materials for businesses continued to rise.”
Grant Fitzner went on to say: (quote 2 of 2) pic.twitter.com/jnOLaEH9b1
— Office for National Statistics (ONS) (@ONS) December 17, 2025The recent figures show further easing of the headline rate after a spike this year, which economists attribute in part to higher employment costs from the government’s initial budget being passed on to consumer prices.
This surge in prices has complicated the Bank of England’s approach to cutting interest rates, with officials seeking further evidence that inflation is not being driven by factors such as strong wage growth.
The latest figures revealed growing weakness in the labour market, with unemployment rising by one percentage point to 5.1% since Labour took office.
Another ONS data release showed the UK economy contracted for two consecutive months in the lead-up to Chancellor Rachel Reeves’s second budget.
According to London Stock Exchange Group data, over 90% of financial market participants expect the Bank of England to cut its base rate to 3.75% from 4%, the lowest level in nearly three years.
What did Rachel Reeves say about falling inflation and the cost of living?
Commenting on the latest inflation figures, the Chancellor Rachel Reeves said,
“I know families across Britain who are worried about bills will welcome this fall in inflation.”
She stated,
“Getting bills down is my top priority. That is why I froze rail fares and prescription fees and cut £150 off average energy bills at the budget this year.”
Ms Reeves added,
“The Bank of England agree this will help cut prices and expect inflation to fall faster next year as a result.”
How did economists respond to the November inflation drop?
Paul Dales, the chief UK economist at the consultancy Capital Economics, said,
“The further big fall in CPI inflation will surely be enough to prompt the governor of the Bank of England to reach into his big bag tomorrow and give borrowers the early Christmas present of a cut in interest rates from 4% to 3.75%.”
Anna Leach, chief economist at the Institute of Directors, stated,
“Inflation has fallen back decisively in today’s data, and by more than expected, bringing the rate to its lowest since March. Food price inflation has eased sharply to its lowest rate since April, despite typically rising at this time of year, while services inflation – a key indicator of domestic price pressure – has also edged down. Together, these figures increase the likelihood of a welcome interest rate cut tomorrow.”
“Recent indicators point to a notable weakening in both the economy and the labour market, with unemployment reaching its highest level since 2015. Today’s inflation outturn has also come in below the Bank of England’s expectations, driven in part by unexpectedly soft food prices. The Bank will also assess the impact of the recent budget on the outlook for inflation. And despite being trailed as actively disinflationary, the budget’s effects are more mixed due to the increase in spending and borrowing over the next two years. But on balance, the case for a rate cut has been made,”
she added.
Paul Nowak, TUC chief, said the Bank of England was “too cautious” throughout the year.
He said,
“Inflation may be falling, but many working people are still struggling to afford the basics. The government acted to protect living standards and push back against inflation in last month’s Budget, but more must be done.”
Mr Nowak continued,
“The economy is fragile and high interest rates are draining confidence from households and firms. It’s vital that we now boost demand. The Bank of England has been too cautious this year, and inflation is already lower than they expected only last month. So an interest rate cut this week must be the start of a sequence of reductions over the months ahead. It’s long overdue and it’s the shot in the arm that the economy needs. Lower rates will give firms the confidence to invest and help get more households spending.”
Suren Thiru, economics director of the Institute of Chartered Accountants in England and Wales, said,
“While the financial squeeze on households and businesses remains severe, these figures offer reassurance that the UK is moving towards a more modest inflation environment, helped by lower food prices. Softening services and core inflation offer hope that underlying price pressures are becoming less sticky. The growing downward pressure from a loosening labour market and wilting economy should help keep it on a downward path.”
He added,
“UK inflation’s journey back to target should accelerate appreciably in 2026 with lower food and fuel costs alongside the energy bill changes announced in the Budget likely to pull it back to 2% by next summer. These figures, alongside the recent deluge of downbeat data, mean that an interest rate cut tomorrow looks certain. The vote split could be more dovish than many expect as policymakers will have now assessed the budget’s deflationary impact.”
How did the Bank of England expect to cut rates amid falling inflation?
The Bank of England is widely expected to lower its base rate on Thursday, following weaker economic growth, rising unemployment, and easing inflation, with markets pricing in a 90% probability of a 0.25 percentage point cut ahead of November’s inflation data.
In last month’s autumn budget, Chancellor Rachel Reeves focused on tackling the cost of living, while introducing £26bn in tax increases to repair public finances and ending the two-child benefit cap.”
The central bank explained that measures introduced by the chancellor, including cuts to energy bills, prescription fees, and fuel duty, could reduce headline inflation by up to 0.5 percentage points next year.
How do interest rates control inflation?
Central banks primarily control inflation by adjusting interest rates, which influences the cost of borrowing and the reward for saving, thereby impacting economic activity and price levels.
When inflation is above its target (typically 2%), a central bank raises its policy interest rate, which then affects the wider economy through several channels.
Higher interest rates make loans for major purchases, such as homes, cars, and business investments, more expensive. This reduces consumer and business demand for goods and services.
A drop in spending and investment slows the economy and eases demand-driven inflation, as businesses are less able or willing to raise prices when customer demand is weak.
When domestic interest rates rise, foreign investment tends to increase, strengthening the local currency. A stronger currency lowers the price of imports, helping to curb cost-push inflation.