UK November CPI +2.6% vs +2.6% y/y expected

• Prior +2.3%
• Core CPI +3.5% vs +3.6% y/y expected
• Prior +3.3%

The figures are consistent with a rise in prices on an annual basis for November, that after Ofgem removed the energy price cap back in October. In any case, this just reaffirms the case for the BOE to stay on hold for this week. Looking at the details, services inflation remain unchanged at 5.0% on a core basis. And that will remain a key sticking point for the BOE going into next year.

Besides that, there is still some uncertainty on how the latest budget will impact price pressures. But economists are expecting it to be slightly more inflationary. And coupled with an increase in employers’ National Insurance i.e. social security, it could materially feed into the inflation numbers at the start of next year.

If so, that might be an impediment for the BOE to make a strong case for cutting rates in the first half of the year. But as things stand, policymakers and economists are all expecting inflation to settle lower later on in 2025. So, there’s still that argument to be had.

This article was written by Justin Low at www.forexlive.com.