Official data released on Wednesday revealed that Britain's annual inflation rate in November fell more than anticipated to 3.2 percent, confirming predictions that the Bank of England may lower its primary interest rate this week.
According to a statement from the Office for National Statistics (ONS), the Consumer Prices Index fell from 3.6 percent in October.
Inflation in November was predicted by economists to be 3.5 percent. With the UK economy struggling to develop and unemployment rising, it is widely anticipated that the Bank of England would lower its main interest rate by a quarter point to 3.75 percent on Thursday.
According to a release, "inflation fell notably in November to its lowest annual rate since March," said Grant Fitzner, chief economist at the ONS.
"Lower food prices, which traditionally rise at this time of the year, were the main driver of the fall with decreases seen particularly for cakes, biscuits and breakfast cereals."
The statistics was welcomed by Finance Minister Rachel Reeves, who has faced criticism for Britain's poor economic growth alongside Prime Minister Keir Starmer.
"Getting bills down is my top priority," she declared in a statement following the announcement of plans in the Labour government's yearly budget to reduce the cost of energy and train tickets.
Following the data, markets priced in a Bank of England rate drop on Thursday and additional expected reductions in 2026, which increased the pound's decline versus the dollar.
Paul Dales, chief UK economist at Capital Economics research group, said in a statement that the "big fall in CPI inflation 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."
He added that with UK inflation expected to approach the central bank's two-percent objective, the BoE remained on track to significantly reduce borrowing costs next year.
Interest rate reductions lower returns on savings saved in banks, even if they can benefit people and businesses taking out loans.
Changes in the BoE's monetary policy are often reflected in the accounts of Britain's retail banks, particularly mortgages. Due to worries about how US tariffs will affect the UK economy, the central bank last lowered its benchmark interest rate in August.
Since the central bank started a trimming cycle in August 2024, one month after Labour won a general election, this was the bank's fifth drop.
