UK inflation stays low despite rising cost of chocolate and holidays

Three-year low of 1.5% comes amid speculation that interest rates will be cut soon

UK inflation remained at the lowest level in three years in November despite rising prices for a variety of goods including chocolate, concert tickets and package holidays.

The Office for National Statistics (ONS) said the consumer prices index (CPI) held steady at 1.5% last month, the same level recorded in October, as the annual increase in some prices was offset by falling prices elsewhere, including for cigarettes and hotel rooms.

Rate-setters at the Bank of England are preparing to meet on Thursday as speculation mounts that they will cut interest rates soon, with the British economy faltering and inflation remaining below the Bank’s 2% target.

Threadneedle Street’s monetary policy committee was divided last month on whether to lower borrowing costs, with two of the nine-strong team voting for a 0.25% cut from the 0.75% base rate. City economists are anticipating the same outcome again on Thursday.

David Cheetham, the chief market analyst at the online financial trading firm XTB, said: “There are growing calls that the Bank may be set to loosen policy in the coming months, although the key determinant will likely be how they view the election result and what this means going forward.”

Growth in the British economy has stalled in recent months at a time of intense Brexit uncertainty and political gridlock in the run-up to the election. Although stock markets initially roared ahead after Boris Johnson’s landslide victory, City investors have grown more cautious as the prime minister sets a hardline stance over agreeing a trading relationship with the EU within a year.

Business leaders have warned the deadline for the transition period at the end of December 2020 would represent another Brexit cliff edge likely to deter business investment in Britain.

The National Institute of Economic and Social Research said the rising price of food and drink contributed most to inflation in the year to November, but those increases had been offset by slight falls in alcohol, tobacco and clothing prices.

Sign up to the dailyBusinessToday email or follow GuardianBusinesson Twitter at @BusinessDesk

At a regional level, NIESR found inflation was highest in the north, at 1.5%, and lowest in the south-west at 0.7%.

UK house price growth slowed to its lowest annual rate in more than seven years, dragged down by falling prices in London. House prices continued to grow across Northern Ireland, Wales and Yorkshire.

According to the ONS, the price of an average home rose by 0.7% over the year to October to £233,000, the weakest growth rate since September 2012.


Richard Partington Economics correspondent

The GuardianTramp

Related Content

Article image
The Brexit economy: looming rate rise clouds outlook as inflation dips
‘The beast from the east’ blew the UK economy off course, further complicating an already complex picture

Richard Partington

26, Apr, 2018 @12:21 PM

Article image
Rising food and fuel prices hoist UK inflation rate to 2.3%
Standard of living fears build as wage growth slows and inflation leaps from 1.8% in January to highest level since September 2013

Katie Allen

21, Mar, 2017 @11:27 AM

Article image
New Covid variant and looming Brexit disruption deepen UK economic gloom
Our latest snapshot of key economic indicators show retail sales falling, job losses soaring, GDP growth and stock market stalling

Richard Partington Economics correspondent

23, Dec, 2020 @12:00 PM

Article image
How has Brexit vote affected UK economy? January verdict
Each month we look at key indicators to see what effect the Brexit process has had on growth, prosperity and trade

Richard Partington Economics correspondent

30, Jan, 2020 @6:30 AM

Article image
UK economy at the crossroads before lockdown ends
Our analysis of Covid effects on businesses examines work, growth and stock markets

Richard Partington Economics correspondent

25, Feb, 2021 @6:00 AM

Article image
How has Brexit vote affected UK economy? December verdict
Each month we look at key indicators to see what effect the Brexit process has had on growth, prosperity and trade

Richard Partington Economics correspondent

27, Dec, 2019 @7:00 AM

Article image
UK inflation dips below zero again
ONS says fall in road fuel cost and a less-than-expected rise in clothing prices are behind latest drop in inflation to -0.1%

Katie Allen and Rupert Jones

13, Oct, 2015 @9:02 AM

Article image
Rising inflation spooks Bank of England rate-setters into taking action
Analysis: on this occasion the MPC has decided the threat of inflation becoming embedded is greater than the risk to growth

Larry Elliott Economics editor

16, Dec, 2021 @1:35 PM

Article image
Inflation finally falls to Bank of England's 2% target
Surprise drop in December hits mark for first time in four years, helped by a smaller rise in food prices and early sales discounts

Angela Monaghan and Katie Allen

14, Jan, 2014 @11:12 AM

Article image
Keep UK interest rate low for now, IMF tells Bank of England
International Monetary Fund warns Bank to be ready to raise rates if other measure fail to keep housing market in check

Katie Allen

28, Jul, 2014 @4:50 PM