The inflation rate in the United Kingdom (U.K.) fell more than expected in November to an annualized 3.9%, its lowest reading since September 2021.
Economists polled by the Reuters News Agency had expected a November inflation reading of 4.4%. Inflation in the U.K. was at an annualized rate of 4.6% in October of this year.
On a monthly basis, inflation in the U.K. declined by 0.2% in November compared to a consensus forecast among economists for a 0.1% increase.
Core inflation that excludes volatile food, energy, alcohol, and tobacco prices came in at an annualized rate of 5.1% in November, well below a 5.6% forecast.
The Office for National Statistics said the largest downward contributions to inflation came from transport, recreation and culture, and food and non-alcoholic beverages.
The surprisingly large drop in inflation has led to increased bets among futures traders that the Bank of England will start cutting interest rates in 2024.
Earlier in December, the Bank of England chose to keep its main interest rate unchanged at 5.25%. The central bank reiterated that interest rates are likely to be “…restrictive for an extended period of time.”
Inflation in the U.K. peaked at a 41-year high of 11.1% in October 2022. The Bank of England targets inflation at an annualized rate of 2%.
The British economy has also weakened, with the latest data showing a contraction of 0.3% month-over-month in October of this year and zero growth in the third quarter.
