Lower clothing and food prices help inflation fall by more than expected
📈 UK Inflation Falls Sharply to 3.2% Ahead of Bank of England Decision
The UK’s annual inflation rate fell unexpectedly to 3.2% in November 2025, down from 3.6% in October. This is the lowest level in eight months and represents a more significant drop than the 3.5% analysts had predicted.
The data, released by the Office for National Statistics (ONS) on Wednesday, has strengthened expectations that the Bank of England will deliver a "festive gift" to borrowers by cutting interest rates tomorrow.
Key Drivers of the Inflation Drop
According to ONS Chief Economist Grant Fitzner, the primary catalyst for the decline was a slowdown in food and non-alcoholic beverage prices.
-
Food & Drink: Inflation in this category fell to 4.2% (down from 4.9% in October). Notably, prices for cakes, biscuits, and breakfast cereals decreased between October and November—a period when they traditionally rise.
-
Alcohol & Tobacco: This sector saw a sharp drop to 4% from 5.9%, the lowest rate in nearly three years.
-
Clothing & Footwear: Prices fell by 0.3% month-on-month, aided by higher-than-usual Black Friday discounting, particularly in women's clothing and shoes.
-
Other Slowdowns: The cost of tobacco, restaurant meals, hotel stays, furniture, and transport also contributed to the downward pressure.
The Interest Rate Outlook
The drop to 3.2% is seen as the "final piece of the puzzle" for the Bank of England's Monetary Policy Committee (MPC), which meets tomorrow, Thursday, 18 December.
-
Market Prediction: Investors are pricing in a 90% chance of a 0.25 percentage point cut, which would bring the base rate down from 4% to 3.75%.
-
Economic Context: The case for a cut is bolstered by recent data showing the UK economy shrank by 0.1% in the three months to October, while unemployment rose to 5.1%.
-
2026 Forecasts: Analysts suggest that if inflation continues this downward path, the Bank could cut rates to as low as 3% by July 2026.
Government and Expert Reaction
Chancellor Rachel Reeves welcomed the data, stating that getting bills down remains her "top priority." She highlighted Budget measures—such as freezing rail fares and prescription fees, and cutting £150 off average energy bills—as key factors that the Bank of England agrees will help inflation fall faster next year.
However, experts urge caution for households:
"Lowering inflation doesn't mean the cost of living is getting cheaper; it just means prices are rising less quickly. Many households are still reeling from the effects of the mega price hikes we've seen in recent years." — Danni Hewson, AJ Bell
While some staples like pasta (-4.2%) and olive oil (-16.2%) have seen price drops, other Christmas favourites remain expensive, with beef prices up 27.7% and chocolate up 17.3% compared to last year.
