UK inflation dips by more than expected to 3.2% as food prices fall

The news follows November's figures, which saw inflation fall to its lowest level since June, giving the Chancellor a much needed pre-Budget boost.

The new figures come after economists widely predict a dip from October's 3.6% mark - but few predicted the figure to dip as low as 3.2%, with most forecasting a figure of around 3.5%.

The figures make an interest rate cut by the Bank of England's Monetary Policy Committee all the more likely when the announcement comes on Thursday.

Reacting to the news, Rachel Reeves said: "I know families across Britain who are worried about bills will welcome this fall in inflation.

"Getting bills down is my top priority. That is why I froze rail fares and prescription fees and cut £150 off average energy bills at the Budget this year.

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"The Bank of England agree this will help cut prices and expects inflation to fall faster next year as a result."

Inflation is calculated by the average price of a range of household items, with lower food prices, which traditionally rise in the run-up to Christmas, cited as the main downward driver of inflation.

Tobacco costs were also seen to dip, further reducing that figure.

A smaller jump in the cost of household goods offset a jump in hotel prices, according to the figures.

Services price inflation was also seen to fall, according to the Office for National Statistics (ONS) figures, which fell from 4.5% to 4.4%.

Most analysts expect tomorrow's interest rate announcement to see rates cut from 4% to 3.75%.

Inflation fell notably in November to its lowest rate since March, with the figures marking a notable turning point following last month's fall.

The figures will please economists, with the Bank of England tasked with keeping inflation at its 2% target level.

"Lower food prices, which traditionally rise at this time of year, were the maid driver of the fall with decreases seen particularly for cakes, biscuits and breakfast cereals," said ONS chief economist Grant Fitzner. 

"Tobacco prices also helped pull the rate down, with prices easing slightly this month after a large rise a year ago."

Rob Wood and Elliott Jordan-Doak, economists for Pantheon Macroeconomics, said that “food prices falling month-on-month” will help “drag inflation down” in November.

Food prices had risen sharply in October, official data showed, with inflation for everyday groceries such as bread, cereal, milk and coffee accelerating.

The economists predicted that this will help offset a “chunky hotel price rise” and inflation across catering, leisure and hospitality firms remaining elevated during the month, “likely as continued strong labour costs – in part due to payroll tax hikes – boost prices”.

Sanjay Raja, chief UK economist for Deutsche Bank, also projected the rate of CPI to fall to 3.5% in November.“After peaking in August, we expect inflation to continue on its downward trajectory,” he said.

“Autumn Budget measures have lowered our projections for inflation for next year – particularly in the spring. Lower energy prices have also helped lower our projections.

“We see CPI landing pretty close to target from spring next year before more sustainably returning to target in 2027.”