UK inflation falls from 41-year high, giving some relief to Bank of England

British inflation fell more sharply than expected in November to 10.7 percent from October’s 41-year high of 11.1 percent, according to official consumer prices data that may offer some comfort to the Bank of England and hard-squeezed households.

Economists had forecast the consumer price inflation rate would drop to 10.9 percent. Both US and euro zone inflation fell more steeply than expected in November, raising hopes that the current wave of inflation may have peaked.

“Prices are still rising, but by less than this time last year, with the most notable example of this being motor fuels,” the Office for National Statistics’ chief economist Grant Fitzner said.

The BoE is battling inflation that is far above its 2 percent target, and has raised interest rates sharply over the past 12 months. Economists mostly expect it will raise rates again on Thursday to 3.5 percent from 3 percent.

In November, the BoE forecast Britain was heading into a long recession, with inflation not returning to target until early 2024, and the government’s budget watchdog predicted the biggest squeeze on living standards since records began in the 1950s.

Core CPI, which excludes energy, food, alcohol and tobacco prices, and which some economists think gives a better indication of longer-term price trends, dropped to 6.3 percent in November, down from October’s reading of 6.5 percent.

British inflation started to pick up in 2021, driven by post-pandemic bottlenecks in the domestic and global economy, and accelerated when European energy prices surged after Russia’s February invasion of Ukraine.

The BoE has also highlighted labor shortages and trade and migration frictions due to Brexit as playing a role in pushing up prices.

SOURCE: NEWS AGENCIES