LONDON, December 18, 2025: UK inflation slowed more than expected in November, reaching its lowest level in eight months and bolstering expectations that the Bank of England will move toward reducing interest rates in the coming months. According to data released by the Office for National Statistics, the Consumer Prices Index (CPI) rose 3.2 percent in November compared with the same month a year earlier, down from 3.6 percent in October. The figure came in below both economists’ expectations of 3.5 percent and the Bank of England’s forecast of 3.4 percent. The decline was largely driven by lower food prices, which helped offset persistent increases in services and housing costs. Food inflation eased notably as supermarket competition and improved supply chains reduced costs for consumers. The latest figures mark a continued deceleration from the double-digit inflation rates recorded throughout 2022 and early 2023, when soaring energy and commodity prices placed heavy pressure on household budgets.
Following the release of the data, the British pound fell 0.7 percent to $1.3322, while government bond yields declined as traders increased bets on lower borrowing costs in early 2026. Market pricing now fully reflects expectations of two rate cuts by the end of April, according to trading data. The Bank of England’s Monetary Policy Committee is set to announce its latest interest rate decision on Thursday. The central bank has held its base rate at 5.25 percent since September, its highest level since 2008, following a series of aggressive rate increases aimed at bringing inflation back toward its 2 percent target. The sharp fall in consumer price growth provides new evidence that restrictive monetary policy is beginning to curb inflationary pressures. The ONS data also showed that core inflation, which excludes volatile food and energy components, eased to 4.1 percent from 4.3 percent in the previous month.
Services inflation, a key measure closely monitored by policymakers due to its sensitivity to domestic wage trends, also moderated slightly. While inflation remains above target, the continued easing across key components reflects a broader cooling in price pressures across the economy. Lower inflation offers some respite for consumers who have faced sustained cost-of-living pressures since the pandemic and the energy price shock that followed. Retail price growth has slowed in several essential categories, including dairy products, bread, and meat. Transport and fuel prices remained stable, aided by declining oil prices and improved global shipping conditions. Business activity has also shown tentative signs of stabilization, with firms reporting improved supply conditions and modestly lower input costs. Despite this, the broader economic backdrop remains fragile.
Bank of England prepares policy decision amid slowdown
Recent gross domestic product data indicated that the UK economy has experienced limited growth over the past year, constrained by weak productivity and subdued consumer spending. The easing in inflation follows similar trends across major advanced economies. In the United States and the euro area, consumer price growth has also slowed, reflecting a global easing in supply bottlenecks and moderating demand. Central banks in those regions have begun to signal greater confidence that inflation is on a sustainable downward path, though rates remain higher than pre-pandemic levels. Energy prices, a major driver of earlier inflation surges, have continued to stabilize following increased production and a decline in wholesale gas costs. The ONS noted that household energy bills have fallen from the highs seen in 2023, contributing significantly to the latest decline in overall inflation. Clothing and recreation prices also showed moderate growth, while alcohol and tobacco prices rose marginally. The latest inflation report is the final major economic indicator before the Bank of England’s policy meeting, where officials will assess whether to maintain current borrowing costs or begin a gradual easing cycle in 2026.
Economic growth remains restrained despite improved prices
Policymakers have emphasized that decisions will remain data-driven, focusing on sustainable progress toward the inflation target. While the headline rate remains above the central bank’s goal, the downward momentum suggests that the UK is entering a period of greater price stability after two years of intense inflationary pressure. The moderation in consumer prices is expected to support purchasing power and help stabilize financial conditions as the economy continues to adjust to post-pandemic and post-Brexit realities. The easing of inflation also provides relief to businesses facing higher operating expenses and to households burdened by elevated mortgage and rental costs. Economists note that continued progress toward the inflation target will strengthen consumer confidence and may create more favorable conditions for sustained economic recovery. The trend indicates that underlying cost pressures are gradually abating, supporting broader financial resilience across key sectors of the economy. – By EuroWire News Desk.