UK inflation rate drops below forecast

The United Kingdom (UK) inflation fell much more sharply than forecast in November 2025 to 3.2%.

The UK inflation rate fell to its lowest since March, from 3.6% recorded in October.

The Office for National Statistics (ONS) announced this via a statement issued on Wednesday.

The decline in inflation reflected falls in the cost of cakes, biscuits, cereals and confectionery, as well as a smaller impact from tobacco prices and Black Friday discounts on women’s clothes.

The reading was below all forecasts in a Reuters poll of economists – which had pointed to a fall to 3.5% – and undershot the Bank of England’s (BoE) own expectation of a drop to 3.4%.

Sterling dropped by more than half a cent against the United States dollar after the data was released, while interest rate futures priced in a near 100% chance of a quarter-point rate cut on Thursday and a higher chance of multiple rate cuts in 2026.

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Before the decision, markets had priced in a more than 90% chance of the BoE cutting rates by a quarter point to 3.75% on Thursday, but many economists had viewed the decision as finely balanced and still see the BoE nearing the end of its rate-cutting cycle.

Wednesday’s data showed services price inflation, which the BoE sees as a guide to longer-term price pressures, fell to 4.4% rather than holding at 4.5% as economists and the BoE had expected.

Food and non-alcoholic beverage inflation dropped to 4.2% from 4.9% in October. The BoE had said it expected it to reach 5.3% in December, the highest in nearly two years.

Core consumer price inflation – which excludes more volatile food, alcohol, energy, and tobacco prices – also slowed to 3.2% rather than holding at 3.4% as economists had forecast.

The Star