UK inflation has risen for the second month in a row, hitting 2.6% in the year to November, the fastest pace since March, according to official figures.
The increase was primarily driven by higher fuel and clothing prices, along with rising ticket costs for gigs and plays. However, airfares saw a significant drop, which partially offset the overall inflation increase.
Grant Fitzner, chief economist at the Office for National Statistics (ONS), noted, “Inflation rose again this month as prices for motor fuel and clothing increased, which had fallen a year ago. This was partially offset by a large drop in airfares, the largest on record for November.”
The latest inflation data means the Bank of England is unlikely to cut interest rates when it meets on Thursday. The central bank has been grappling with high inflation and slower economic growth. While inflation is below its peak in late 2022, it remains higher than earlier in the year.
Chancellor Rachel Reeves acknowledged the ongoing cost-of-living challenges. “Today’s figures are a reminder that for too long the economy has not worked for working people,” she said, adding that she is focused on putting more money in the pockets of citizens.
Meanwhile, Shadow Chancellor Mel Stride criticized government measures, blaming them for fueling inflation and increasing costs for consumers. “These figures mean higher costs in the shops, less money in working people’s pockets, and the risk of keeping mortgage rates higher for longer,” he said.
In addition to fuel and clothing, food and non-alcoholic drinks, alcohol, tobacco, and footwear all saw prices rise faster than last month. A broader measure of inflation, which includes housing and household services such as rent, rose by 3.5% over the past year.
Sarah Coles, head of personal finance at Hargreaves Lansdown, compared inflation to an unwelcome guest overstaying its welcome: “The question is whether it can be shifted, or if it’s going to hang around to ruin our plans for months, eating us out of house and home and driving up the cost of everything.”
Businesses are also feeling the strain of rising costs. David Miller, owner of Miller’s Fish and Chips in Haxby, Yorkshire, said the combination of increased fuel, utilities, and wages has impacted his bottom line. “It’s been a tough year,” Miller said, adding that his business employs 60 people and tries to pay above the minimum wage.
As wage costs are set to rise again in April, businesses and households continue to face financial pressure.
With the economy shrinking in September and October, the Bank of England faces a dilemma. While interest rate cuts are typically used to stimulate growth, persistent inflation and rising wages may keep rates at their current 4.75% for longer.
Economists now predict that interest rates will fall more slowly than previously expected. Paul Dales, chief UK economist at Capital Economics, said the higher inflation figures make it “very unlikely” that the Bank of England will cut rates in its upcoming meeting. However, he forecasts that inflation will eventually return to the Bank’s 2% target by the end of next year.
