Inflation in the UK rose to 2.6% in November, marking its highest level since March and continuing an upward trend for the second consecutive month.
This represents an increase from 2.3% in October and a significant jump from September’s 1.7%, the first time in over three years inflation fell below the Bank of England’s (BoE) 2% target.
Despite the rise, the BoE’s closely watched underlying measure of inflation, services inflation, remained steady at 5.0% in November, offering the central bank a modest reprieve amid ongoing price pressures.
The Office for National Statistics (ONS) attributed the rise to a broad-based increase, with transport costs leading the charge, particularly petrol prices and car purchases.
These gains were partially offset by smaller rises in airfares and restaurant costs.
Martin Sartorius, principal economist at the Confederation of British Industry (CBI), highlighted the broader economic challenges, stating, “Another consecutive monthly rise in inflation, reaching its highest level since March, underscores the persistent price pressures within the UK economy.”
The BoE remains focused on tackling domestic price pressures, particularly through its services inflation metric. Economists had anticipated a slight increase to 5.1%, but the figure held steady at 5.0%, slightly above the BoE’s forecast of 4.9%.
Additionally, core inflation—which excludes volatile elements like energy, food, alcohol, and tobacco—rose to 3.5% in November from 3.3% in October.
The BoE is expected to keep interest rates on hold following its December meeting, as inflation aligns closely with its forecast of 2.4% for November.
However, wage growth remains a concern, as does the government’s planned tax increase for employers, set to take effect in April, which may push prices higher.
Economists predict inflation could peak at 3% by 2025, indicating continued price pressures for UK households and businesses.
Following the ONS data release, sterling briefly dipped against the dollar, reflecting market uncertainty over inflation trends and the BoE’s future policy decisions.
The BoE has indicated that any cuts to interest rates will proceed cautiously, even as signs of economic slowdown become apparent. This measured approach is aimed at balancing inflation control with economic stability.
