UK inflation slows to 3.9 percent – lowest rate in 2 years (Image: Getty)
UK inflation eased back to its lowest level for more than two years last month as falling petrol prices helped drive a bigger-than-expected fall, official figures show.
The Office for National Statistics (ONS) said the rate of Consumer Prices Index inflation fell to 3.9 percent in November, down from 4.6 percent in October, and the lowest level since September 2021.
Most economists had been expecting inflation to fall to 4.3 percent last month.
Grant Fitzner, chief economist at the Office for National Statistics (ONS), commented: “Inflation eased again to its lowest annual rate for over two years, but prices remain substantially above what they were before the invasion of Ukraine.
“The biggest driver for this month’s fall was a decrease in fuel prices after an increase at the same time last year.
The “biggest driver” for November’s fall in inflation was a drop in fuel prices, ONS has said. (Image: Getty)
“Food prices also pulled down inflation, as they rose much more slowly than this time last year. There was also a price drop for a range of household goods and the cost of second-hand cars.”
Chancellor Jeremy Hunt claimed the UK is “back on the path to healthy, sustainable growth”.
The Government had set a target of halving inflation in 2023, although the current rate is still well above the Bank of England’s two percent goal.
Mr Hunt said: “With inflation more than halved we are 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. But many families are still struggling with high prices so we will continue to prioritise measures that help with cost-of-living pressures.”
The ONS figures showed that falling prices at the fuel pumps helped bring down the rate of inflation, with the average cost of petrol dropping by 4.1p a litre between October and December, to stand at 151p last month.
Overall motor fuel prices fell by 10.6 percent in the year to November 2023, compared with a drop of 7.6 percent in the year to October.
CPI was also pulled lower by a slowdown in the pace of annual food price inflation, which dropped to 9.2 percent last month, down from 10.1 percent in October, and the lowest rate since May last year.
Food prices have now fallen for eight months in a row, from an eye-watering more than 45-year high of 19.2 percent in March, which is providing some much-needed respite for cash-strapped households.
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Core inflation, which reflects the change in prices of goods and services, except for those from the food and energy sectors, rose by 5.1 percent in the 12 months to November 2023, down from 5.7 percent in October.
The core inflation rate is the metric used to determine the impact of rising prices on consumer income. The Bank of England also takes this number – along with the CPI – into consideration when deciding whether to adjust the Base Rate.
While this marks a further drop from the high of 7.1 percent seen in May – the highest recorded since March 1992 – it remains significantly high.
Nicholas Hyett, investment analyst at Wealth Club commented: “Like any Christmas miracle the main character’s actions are only passingly relevant to the outcome. The fall in inflation has been driven largely by lower oil and gas and food prices, with core inflation still high at 5.1 percent.
“Commodity prices aren’t something governments or even central banks have much control over – and until core inflation (reflecting things like domestic pay rises) is back closer to target, we suspect the Bank of England will remain cautious on interest rates.”
Mr Hyett added: “Still, with inflation now at its lowest level in over two years, it feels like the worst may now be behind us. Unless and until the febrile geopolitical environment sends oil prices soaring once again of course…”
Anthony Codling, managing director at RBC Capital Markets said the fall is “good news” for the UK housing market. He explained: “As CPI falls it is likely that, over time, mortgage rates will follow suit.
“We expect that today’s news will re-ignite the debate about when Bank Rate will start to fall. Falling mortgage rates mean more people will be able to buy a home and activity in the housing market is likely to rise which is likely to underpin house prices, reducing the risk of house price falls in the new year.”
