UK inflation fell by more than expected in November, reaching its lowest level in eight months and strengthening the case for an imminent interest rate cut. A sharper-than-forecast slowdown in food prices, combined with widespread retail discounting, has eased pressure on household budgets and policymakers alike.
Figures published by the Office for National Statistics show that inflation, as measured by the Consumer Price Index, fell to 3.2% in November, down from 3.6% in October. Economists had expected a more minor fall, to around 3.5%.
The decline came at a sensitive moment for the economy, just days before the Bank of England cut Bank Rate by 0.25 percentage points to 3.75% at its December meeting. With growth subdued and unemployment rising, attention is now turning to whether policymakers signal further easing at the next decision on 5 February 2026.
Food prices and discounts drive fall
The slowdown in inflation was driven largely by easing food prices, which typically rise in the run-up to Christmas. Instead, heavy discounting linked to Black Friday promotions helped push prices lower across a range of everyday items.
Grant Fitzner, chief economist at the ONS, said lower food prices were the main factor behind the drop. He highlighted price falls in cakes, biscuits and breakfast cereals, alongside a modest easing in tobacco prices following a sharp rise a year earlier. A decline in the price of women’s clothing also contributed to the fall in the headline rate.
Food and drink inflation slowed from 4.9% in October to 4.2% in November. Several staple products saw sharp year-on-year price declines, including a 16.2% fall in olive oil, a 6.1% drop in flours and other cereals, and a 4.2% decrease in pasta and couscous prices.
The British Retail Consortium said extended Black Friday promotions played a significant role. Its director of insight, Kris Hamer, said intense competition among retailers led to substantial pre-Christmas discounts, particularly on meat products such as pork, lamb and chicken.
Core inflation, which strips out volatile items such as food and energy and is closely watched by the Bank, also eased from 3.4% to 3.2%. This further reinforced expectations that inflationary pressures are continuing to fade.
Markets and policymakers look ahead
Financial markets reacted swiftly to the data. Sterling fell around 0.7% against the dollar, while Government borrowing costs declined. Traders are now pricing in a greater than 90% chance of a quarter-point interest rate cut, which would take the base rate down from its current level of 4%.
Economists said the latest figures leave policymakers little room to delay. James Smith, developed markets economist at ING, said the fall in inflation was further evidence that price pressures are easing.
The data also aligns with the Government’s cost-of-living agenda. Chancellor Rachel Reeves made reducing household bills a central aim of last month’s autumn budget, alongside £26bn of tax rises to stabilise the public finances and fund the removal of the two-child benefit cap.
The Bank has previously stated that measures announced by the Chancellor, including support for energy bills, prescription charges, and fuel duty, could lower headline inflation by up to half a percentage point next year. Reeves said falling inflation would be welcome news for families worried about rising costs, reiterating that reducing bills remains her top priority.
Despite the improvement, inflation remains well above the Government’s 2% target. Some economists have cautioned that lingering pressures could limit how far and how fast interest rates can fall beyond 2025.
Mel Stride, the shadow chancellor, said that while the decline in inflation was positive, prices were still rising too quickly for many households. Campaign groups echoed those concerns. Chris Belfield, chief economist at the Joseph Rowntree Foundation, said millions of families are heading into Christmas unable to afford essential items, with unemployment rising and real earnings growth remaining weak.
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