New data from the Office for National Statistics (ONS) has revealed that UK inflation rose to 2.6% in November, exceeding the Bank of England’s forecast of 2.4% and 2.3% recorded in October.
The surprise jump marks the second straight monthly increase, pushing the headline figure above the central bank’s target of 2%.
The acceleration in price growth has fueled expectations that the Bank of England’s Monetary Policy Committee will vote decisively to keep interest rates at 4.75% on Thursday, with an 8-1 majority likely to opt for no change. Policymakers have recently emphasized caution as they assess persistent inflationary pressures against the backdrop of slowing economic growth.
Services inflation, which the bank closely monitors as a measure of underlying price trends, remained stable at 5%. Meanwhile, core inflation – which excludes volatile food and energy costs – rose from 3.3% to 3.5%. In addition, wage growth reached 5.2%, further complicating the inflation outlook and raising concerns that underlying cost pressures may become entrenched.
The Office for National Statistics attributed the overall increase last month largely to higher petrol costs. However, this upward pressure was partially offset by record declines in airfares. However, the latest figures pose a challenge for Chancellor Rachel Reeves, who this month has faced a series of discouraging economic indicators. The Office for National Statistics recently announced a 0.1% contraction in GDP for October, and private sector employment has fallen at a pace not seen since the financial crisis, barring the pandemic.
Economists have warned that the chancellor’s budget, unveiled on October 30, could lead to higher inflation in the near term due to higher government spending and large increases in taxes on employers. Companies, facing a £25bn increase in National Insurance contributions, have hinted they may pass on these additional costs to consumers. As a result, cautious optimism that the Bank of England may start cutting interest rates early next year has given way to expectations of more gradual easing – with analysts forecasting cuts of just four points over the whole of 2025.
Councilor Reeves acknowledged the ongoing tensions, saying: “I know families are still struggling with the cost of living, and today’s figures are a reminder that the economy has not worked for working people for a long time.” She defended recent measures to support household incomes, including a freeze on fuel duty and a rise in the National Living Wage, while noting that more needed to be done to ensure high pay packages remain ahead of inflation.
Grant Fitzner, chief economist at the ONS, commented on the month’s results, saying: “Inflation rose again this month with motor fuel and clothing prices rising this year but falling a year ago. This was partly offset by airfares, which saw higher Its lowest in November since records began.
As policymakers and businesses prepare to make another interest rate decision, the latest inflation data underscores the delicate balance the UK faces between promoting economic stability and controlling price rises.