LONDON -- UK inflation fell below estimates for a third consecutive month, raising hopes of a Christmas rate cut from the Bank of England.
The Office for National Statistics said headline consumer price inflation slowed to 3.2% y/y in November, undershooting the 3.5% consensus forecast and falling sharply from October’s 3.6% reading. Core CPI also eased to 3.2%, two-tenths softer than both expectations and the prior month.
Statisticians reported a marked slowdown in goods price inflation, with the annual rate slipping to 2.1% from 2.6%, while CPI services inflation eased modestly to 4.4% from 4.5% in October.
Grant Fitzner, the ONS’s chief economist, said lower food prices — which typically rise at this time of year — were the main drag on inflation, with notable declines in cakes, biscuits and breakfast cereals.
In the 12 months to November, food and non-alcoholic beverage prices rose 4.2% versus 4.9% previously.
“Tobacco prices also helped pull the rate down, with prices easing slightly this month after a large rise a year ago,” Fitzner explained. “The fall in the price of women’s clothing was another downward driver.”
Morgan Stanley’s Bruna Skarica cautioned that underlying services inflation edged a few basis points higher to around 4.1% y/y, “which takes a bit of a shine off this very good inflation print.” However, she noted that the services miss was driven by weakness in hotels and air fares. “Neither of these is particularly surprising — sampling oddities kept hotel prices far too elevated in August and September, so some reversal was always likely. The same can be said for air fares in September too.”
Despite the pullback, UK inflation remained above the first, or “flash,” November estimates for Germany (2.6%) and France (0.8%). The ONS said the last time the UK inflation rate was below Germany’s was in December 2024.
Source: ONS
Factory gate prices
Producer price data painted a more mixed picture. Output prices rose 3.4% y/y in November, slowing from 3.6% previously. On a month-over-month basis, prices increased 0.1%, in line with both forecasts and the upwardly revised October reading.
Input prices rose 1.1% y/y, up from a revised 0.8% increase in October. On a monthly basis, costs climbed 0.3%, a tenth softer than expected but firmer than the revised flat print a month earlier.
December rate cut incoming
Paul Dales, chief UK economist at Capital Economics, said the latest inflation data “will surely be enough to prompt the Governor of the Bank of England [Andrew Bailey] to reach into his big bag tomorrow and give borrowers the early Christmas present of a cut in interest rates from 4.00% to 3.75%.”
He added that the figures reinforced his firm’s view that the bank rate will be lowered to 3.00% next year.
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- Headline, core CPI undershoot forecasts, fall to 3.2%
- Goods inflation cools sharply; services ease
- Food, tobacco, clothing prices drive downside surprise
- Economists say data boosts case for BoE
By Harry Daniels
LiveSquawk News
@HarryDaniels71
17 December 2025 | 11:00 GMT
LONDON -- UK inflation fell below estimates for a third consecutive month, raising hopes of a Christmas rate cut from the Bank of England.
The Office for National Statistics said headline consumer price inflation slowed to 3.2% y/y in November, undershooting the 3.5% consensus forecast and falling sharply from October’s 3.6% reading. Core CPI also eased to 3.2%, two-tenths softer than both expectations and the prior month.
Statisticians reported a marked slowdown in goods price inflation, with the annual rate slipping to 2.1% from 2.6%, while CPI services inflation eased modestly to 4.4% from 4.5% in October.
Grant Fitzner, the ONS’s chief economist, said lower food prices — which typically rise at this time of year — were the main drag on inflation, with notable declines in cakes, biscuits and breakfast cereals.
In the 12 months to November, food and non-alcoholic beverage prices rose 4.2% versus 4.9% previously.
“Tobacco prices also helped pull the rate down, with prices easing slightly this month after a large rise a year ago,” Fitzner explained. “The fall in the price of women’s clothing was another downward driver.”
Morgan Stanley’s Bruna Skarica cautioned that underlying services inflation edged a few basis points higher to around 4.1% y/y, “which takes a bit of a shine off this very good inflation print.” However, she noted that the services miss was driven by weakness in hotels and air fares. “Neither of these is particularly surprising — sampling oddities kept hotel prices far too elevated in August and September, so some reversal was always likely. The same can be said for air fares in September too.”
Despite the pullback, UK inflation remained above the first, or “flash,” November estimates for Germany (2.6%) and France (0.8%). The ONS said the last time the UK inflation rate was below Germany’s was in December 2024.
Producer price data painted a more mixed picture. Output prices rose 3.4% y/y in November, slowing from 3.6% previously. On a month-over-month basis, prices increased 0.1%, in line with both forecasts and the upwardly revised October reading.
Input prices rose 1.1% y/y, up from a revised 0.8% increase in October. On a monthly basis, costs climbed 0.3%, a tenth softer than expected but firmer than the revised flat print a month earlier.
Paul Dales, chief UK economist at Capital Economics, said the latest inflation data “will surely be enough to prompt the Governor of the Bank of England [Andrew Bailey] to reach into his big bag tomorrow and give borrowers the early Christmas present of a cut in interest rates from 4.00% to 3.75%.”
He added that the figures reinforced his firm’s view that the bank rate will be lowered to 3.00% next year.