UK inflation falls by more than expected to 3.2%, adding to case for interest rate cut | Inflation

Inflation in the UK fell significantly in November to 3.2%, according to official figures, raising the prospect of the Bank of England cutting interest rates on Thursday.

With the economy in a critical week, the Office for National Statistics said the annual inflation rate, as measured by the consumer price index, fell last month from 3.6% in October, beating the City’s forecasts for a modest decline to 3.5%.

Threadneedle Street is expected to cut the base rate on Thursday amid weak economic growth, rising unemployment and easing inflationary pressures. Financial markets were predicting a 90% chance of a quarter-point decline before the latest inflation report was released.

Chancellor Rachel Reeves set living costs as the main target of last month’s autumn budget, alongside £26bn tax rises to help repair the public finances and fund the end of the two-child benefit cap.

The bank said it expected the Chancellor’s measures, including easing tax on energy bills, prescription charges and fuel, could cut headline inflation by up to half a percentage point next year.

But last week’s figures showed the economy unexpectedly contracted in October as consumers curbed spending amid intense pre-budget speculation about tax changes and car production struggled to recover following a cyberattack on Jaguar Land Rover.

More details coming soon…