UK Inflation Weakest In More Than 2 Years

(RTTNews) - UK consumer price inflation reached its lowest level in more than two years in November, strengthening calls for early rate cuts even as Bank of England remains more cautious on signaling future easing.

The consumer price index rose 3.9 percent year-on-year, which was slower than the 4.6 percent increase in October, the Office for National Statistics reported Wednesday.

This was the weakest inflation since September 2021 and also below economists' forecast of 4.4 percent. On a monthly basis, the CPI decreased 0.2 percent, following stagnation in October. Prices were expected to climb 0.1 percent.

Excluding energy, food, alcohol and tobacco, core inflation softened more-than-expected to 5.1 percent from 5.7 percent in October. The expected rate was 5.6 percent.

The largest downward contributions came from transport, recreation and culture, and food and non-alcoholic beverages. There were no divisions with large offsetting upward effects.

Capital Economics' economist Ashley Webb said the recent downward trends in overall inflation and core inflation will stall over the coming few months before starting to decline more decisively again in February.

Further, the economist said the recent string of softer-than-expected wage and inflation data indicates that the BoE may not wait as long as late 2024 to cut rates.

Despite the BoE's recent pushback, ING economist James Smith said investors are right to be thinking about several rate cuts next year. Last week, the BoE had maintained its key interest rate at a 15-year high of 5.25 percent for the third straight time.

The bank retained a hawkish bias as policymakers viewed that the policy needs to be restrictive for an extended period of time.

Separate data from the ONS showed that the annual inflation rate of the input producer price was negative for the sixth straight month, while the inflation rate of the output prices was negative for the fourth time in the last five months.

Input prices decreased 2.6 percent annually, the same pace of decline as seen in October. Prices were forecast to fall 3.3 percent.

Month-on-month, the input price index slid 0.3 percent, in contrast to the 0.5 percent rise in October.

At the same time, factory gate prices dropped 0.2 percent following a revised fall of 0.3 percent in October. This was less severe than economists' forecast of 0.5 percent drop.

Compared to the previous month, output prices slid 0.1 percent after rising 0.3 percent a month ago.

Separately, the ONS said house prices declined further in October. Average house prices dropped 1.2 percent from a year ago, following a revised 0.6 percent decrease in September.