UK inflation dropped more than anticipated to 3.2% in November, marking an eight-month low. This decrease contrasts with the 3.6% recorded in October. Most economists had forecast a decline to 3.5%. Inflation measures changes in the prices of goods and services over time. The Office for National Statistics (ONS) reported that the recent decrease was primarily due to lower food prices.

Food inflation decreased from 4.9% in October to 4.2% in November. Tobacco prices and the cost of women’s clothing also contributed to the reduction in inflation, according to the ONS. However, raw material costs for businesses continued to rise. Core inflation, excluding volatile food and energy costs, also fell more than expected from 3.4% to 3.2%.

This update on inflation comes just ahead of the Bank of England’s final interest rate announcement of the year, scheduled for later this week. Most economists predict a reduction in the base interest rate from 4% to 3.75%. The Bank of England targets 2% inflation.

Grant Fitzner, chief economist at the ONS, remarked that lower food prices were the primary driver behind the notable decline in inflation in November. He mentioned that decreases were observed in the prices of cakes, biscuits, and breakfast cereals. Tobacco prices and the fall in women’s clothing prices also contributed to the decrease. Additionally, the increase in factory goods’ costs slowed due to lower food inflation, while raw material costs for businesses continued to rise.

Chancellor Rachel Reeves expressed that the decrease in inflation would be welcomed by families concerned about bills. She emphasized her commitment to reducing bills by freezing rail fares and prescription fees and cutting £150 off average energy bills in this year’s Budget. Reeves highlighted that these measures, supported by the Bank of England, are expected to lead to a faster decline in inflation next year.

Inflation serves as a gauge of price increases, illustrating how the cost of items changes over time. A lower inflation rate indicates that prices are rising at a slightly slower pace than before. The ONS calculates inflation based on a “basket of goods” that represents consumer spending habits. However, the headline inflation figure represents an average, and individual prices may vary.

The Bank of England aims for 2% inflation and has adjusted interest rates to achieve this target. Higher interest rates make borrowing more expensive, reducing spending and demand, thus lowering inflation. The base rate currently stands at 4%, having been reduced from a peak of 5.25% in August 2023. Inflation rose in 2021, reaching 11.1% in October 2022, primarily due to higher energy and food costs.

The demand for energy surged post-Covid and was further exacerbated by the conflict in Ukraine, leading to increased food prices. In September 2024, inflation hit a three-year low at 1.7% before edging up in October 2024.