UK inflation rate drops more than expected to 3.9% in November

LONDON — U.K. inflation fell by more than expected in to hit 3.9% in November, in the lowest annual reading since September 2021.

Economists polled by Reuters had expected a modest decline in the headline consumer price index to 4.4%, after the 4.6% annual reading of October surprised to the downside by dropping to a two-year low.

Month-on-month, headline CPI fell by 0.2%, compared to a consensus forecast of a 0.1% increase.

Core CPI — which excludes volatile food, energy, alcohol and tobacco prices — came in at an annual 5.1%, well below a 5.6% forecast.

The Office for National Statistics said the largest downward contributions came from transport, recreation and culture, and food and non-alcoholic beverages.

The Bank of England last week maintained a hawkish tone as it kept its main interest rate unchanged at 5.25%. The Monetary Policy Committee reiterated that policy is “likely to need to be restrictive for an extended period of time.”

The central bank ended a run of 14 straight interest rate hikes in September, as policymakers looked to wrestle inflation back down towards the Bank’s 2% target from a 41-year high of 11.1% in October 2022.

U.K. Finance Minister Jeremy Hunt cheered the Wednesday figures and said the country was “starting to remove inflationary pressures from the economy.”

“Alongside the business tax cuts announced in the Autumn Statement this means we are back on the path to healthy, sustainable growth,” he said in a statement.

“But many families are still struggling with high prices so we will continue to prioritise measures that help with cost of living pressures.”