In a significant development for the UK economy, inflation has fallen more sharply than anticipated, setting the stage for a tense Bank of England interest rate decision tomorrow.
Inflation Cools Beyond Predictions
The Office for National Statistics revealed this morning that the Consumer Price Index (CPI) rose by 3.2 per cent in the 12 months to November 2025. This marks a notable decline from the 3.6 per cent rate recorded in October and comfortably undershoots the 3.5 per cent figure most economists had forecast.
Despite this welcome drop, the inflation rate remains stubbornly above the Bank of England's official two per cent target. This latest data point is the final major economic indicator before the Monetary Policy Committee (MPC) gathers to decide whether to cut interest rates.
Pressure Mounts on the Bank of England
The softer inflation print intensifies the spotlight on Governor Andrew Bailey and his fellow rate-setters. At the last meeting, Bailey emphasised the need for more economic data before considering a cut, making today's release particularly consequential.
Since that previous meeting, the economic landscape has darkened. Official figures showed the UK economy contracted in October, while various surveys have indicated a continuing weakening of the jobs market. Furthermore, Deputy Governor Clare Lombardelli has suggested that policies outlined in Chancellor Rachel Reeves's recent Budget could reduce headline inflation by a further 0.5 percentage points from April next year.
The Decider's Dilemma
Financial markets and the City are largely anticipating a rate cut, with City AM's own shadow MPC advocating for a reduction. However, the final verdict rests on a knife-edge, with Governor Bailey potentially cast as the decisive vote between more cautious 'hawks' and growth-focused 'doves' on the committee.
This morning's inflation data provides compelling evidence for those arguing that the time is right to ease monetary policy to support the faltering economy. All eyes will now be on Threadneedle Street as the MPC deliberates on Thursday.
