LONDON – UK inflation came in slightly below expectations at 10.7% in November, as cooling fuel prices helped ease price pressures, although higher food and energy prices weighed on households and businesses. continues to
Economists polled by Reuters had forecast a 10.9% annual increase in the consumer price index in November, after October saw an unexpected rise to a 41-year high of 11.1%. On a monthly basis, November’s increase was 0.4%, down from 2% in October and below consensus estimates of 0.6%.
The Office for National Statistics said the biggest upward contributions came from “home and household services (especially electricity, gas and other fuels) and food and non-alcoholic beverages.”
The biggest downward contribution in the month came from “Transport, particularly motor fuel”, with rising prices in restaurants, cafes and pubs contributing the biggest, in part, to the upside.
The Bank of England will announce its next monetary policy move on Thursday. It is widely expected to raise interest rates by 50 basis points, as it tackles sky-high inflation and an economy that policymakers are already in the longest recession on record.
The country is facing widespread industrial action over the Christmas period, as workers strike to demand wages approaching inflation and better working conditions.
The independent Office for Budget Responsibility has predicted that the UK will suffer the biggest drop in living standards since records began, as real household incomes are expected to fall by 4.3% in 2022-23.
British Finance Minister Jeremy Hunt announced a sweeping 55 billion pound ($68 billion) fiscal plan last month, including a number of tax increases and spending cuts, in an effort to plug a significant hole in the country’s public finances. .
A positive step, but risks remain
While the drop in Wednesday’s figures is a step in the right direction, the persistent problem of rising food prices and household energy bills remains a thorn in the side of the British economy, Richard Carter noted. , head of fixed interest research at Quilter Cheviot.
However, Carter suggested that inflation will eventually peak, after the US also released a better-than-expected CPI print on Tuesday.
“Temperatures have risen significantly over the past week, and demand for gas will undoubtedly increase as people are forced to heat their homes,” Carter added.
“As the autumn has been very mild, we are only now starting to see the real impact of higher energy bills. While government support remains in place for now, any changes to the April deadline will “created with can have a ticket effect. about inflation.”
The Bank of England faces a difficult task in trying to return inflation to its 2% target while remaining aware of a weak economy. This was reflected in the latest UK labor market data earlier this week, which showed a rise in both unemployment and wage growth.
“While inflation is falling, it remains well above wages, and we are heading into a new winter of discontent with strikes concentrated in the unionized public sector and former national industries,” Carter said. said
The market is pricing in a 50 basis point interest rate hike from the bank on Thursday, taking the benchmark rate to 3.5%. Policymakers have indicated a possible slowdown in the pace of growth in 2023. However, inflation remains well below target.
Carter said: “The Chancellor’s Autumn Statement in November helped clear the waters after months of significant turbulence, but inflation remains well above the Bank’s 2% target, meaning there is still a long way to go. is.” Carter said.
“The prospect of a sharp drop in inflation is highly unlikely, but it’s positive to see it finally heading in the right direction.”
This is an update, please check back later for more.