The UK’s Inflation Rate Exceeds Bank of England’s Target, Interest Rates Unlikely to be Cut
In November, the UK’s annual inflation rate surpassed the Bank of England’s target rate of 2.0%, as reported by the Office for National Statistics. This development has raised doubts about the possibility of interest rates being cut this week.
Responding to the inflation report, Finance Minister Rachel Reeves acknowledged the ongoing struggles faced by families due to the cost of living. She emphasized that the economy has not adequately supported working people for an extended period.
The Office for National Statistics revealed that the Consumer Price Index (CPI) increased by 0.1% in November compared to a 0.2% decrease recorded in the previous year.
The transportation sector had the most significant positive impact on the monthly change in CPI, according to the report.
The Core CPI, which excludes energy, food, alcohol, and tobacco, saw a 3.5% increase in the year leading to November, up from 3.3% in October.
Paul Dales, chief UK economist at Capital Economics, noted that the recent rise in CPI inflation could have been more severe. He also mentioned the unexpected surge in wage growth reported in a recent release, indicating that the Bank of England is unlikely to implement another interest rate cut soon.
After reducing borrowing rates by 25 basis points to 4.75% last month, the Bank of England had made its first rate cut since early 2020. This decision came as UK inflation levels returned to normal after reaching a 16-year high of 5.25% and subsequent rate cut in August.
