UK inflation fell sharply in November, strengthening expectations that the Bank of England may soon reduce interest rates.
Official figures released on Wednesday showed consumer price inflation easing to 3.2%, down from 3.6% in October. This marks the lowest inflation level recorded since March and came in below most market forecasts.
The surprise drop increased market confidence that the Bank of England could announce a rate cut at its upcoming policy meeting. Following the data release, the pound weakened slightly against the US dollar as investors adjusted their expectations for looser monetary policy.
Prices in the services sector, which policymakers closely monitor for longer-term inflation trends, also showed signs of cooling. Meanwhile, food and non-alcoholic beverage inflation declined compared to the previous month, offering some relief to household budgets.
Core inflation — which excludes volatile items such as food and energy — slowed further, indicating that broader price pressures across the economy may be easing.
Despite the improvement, inflation remains well above the Bank of England’s 2% target, and policymakers have warned that price stability could take time to fully return. The central bank has previously signalled that inflation may stay elevated for several more years.
Financial markets are now largely expecting a modest interest rate cut, though economists say the decision could still be closely contested among policymakers.
The latest inflation figures arrive amid ongoing economic challenges, as the government continues to balance cost-of-living concerns with long-term fiscal and climate policy changes.