UK consumer price inflation slowed more-than-expected in November from a 41-year high in October as transport costs rose at a weaker pace, but elevated prices and higher interest rates continue to squeeze household finances, official data showed just a day ahead of the Bank of England rate decision announcement.
Consumer prices logged an annual increase of 10.7 percent in November, the Office for National Statistics said Wednesday. Inflation rate eased from 11.1 percent in October, which was the highest since 1981, and was also weaker than economists’ forecast of 10.9 percent.
Core inflation that excludes energy, food, alcoholic beverages and tobacco, slowed to 6.3 percent, while the rate was forecast to remain at 6.5 percent.
On a monthly basis, consumer prices gained only 0.4 percent. Monthly inflation was expected to ease to 0.6 percent from 2.0 percent in October.
In November, the Bank of England had projected inflation to peak at around 11 percent in the fourth quarter of this year. Thereafter, inflation is seen falling sharply to around 5 percent by the end of next year and to fall to 1.4 percent in two years’ time.
Latest data indicates that inflation has already peaked but prices are still at a much higher level which will be felt for more months to come, British Chambers of Commerce Head of Research David Bharier said.
Inflation data came just a day ahead of the Bank of England rate decision announcement on December 15. Policymakers are expected to shift the gear down on interest rate hikes as the economy enters a ‘prolonged’ recession.
The Monetary Policy Committee is likely to deliver a 50 basis points hike in a split vote, after a 75 basis points increase in the previous meeting.
ONS data showed that the annual increase in transport cost was 7.6 percent, down for a fifth consecutive month from a peak of 15.2 percent in June 2022. Motor fuels and second-hand cars were the main drivers behind the easing.
Similarly, prices of clothing and footwear gained 7.5 percent, down from 8.5 percent in October. The annual rate for alcohol and tobacco slowed to 4.2 percent from 6.2 percent.
By contrast, the annual rate for restaurants and hotels was 10.2 percent, up from 9.6 percent in October. Food and non-alcoholic beverage prices gained 16.5 percent, slightly up from 16.4 percent in October.
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