UK Inflation Surpasses Expectations in November

Inflation in Great Britain rose above expectations in November, reaching its highest level since March, though the negative impact was partially offset by unchanged services inflation, one of the key indicators for underlying inflation tracked by the BOE.

UK consumer prices increased by 2.6% in November, in line with expectations, up from 2.3% in October, while closely watched services inflation remained unchanged at 5.0%, against forecasts of an increase to 5.1%.

Core inflation, excluding the most volatile components, rose to 3.5% in November, up from 3.3% in the previous month, but below the 3.6% consensus.

November’s data indicates that inflation continues to move away from its lowest point in over three years at 1.7%, reached in September, and the 2% target. It also surpassed the BOE’s earlier 2.4% projection for November, suggesting that the cycle of declining consumer prices from a multi-decade high of 11.1% (October 2022) may have ended.

While the rise in inflation was in line with economists’ forecasts, it raises concerns of further price pressures in the British economy, driven by ongoing wage growth, new government tax increases, and higher public spending.

The data keep the Bank of England alert ahead of Thursday’s MPC policy meeting, where the BOE is widely expected to hold interest rates steady.

Inflation in the UK remains higher compared to Germany and France, the EU’s two largest economies, as well as the United States. This keeps the BOE more cautious in easing monetary policy compared to other major central banks, with expectations that inflation could rise to 3% in 2025.

The BOE is likely to maintain a gradual path of rate cuts, balancing the conflicting signals of rising inflation and a slowing economy.