A further 0.7% fall in inflation to 3.9% for November brings it down to its lowest in over two years, down from 10.7% this time last year
The Office of National Statistics (ONS) said that inflation dropped to 3.9% for November, down from 4.6% in October, and almost a 3% drop since September’s level of 6.7%.
The transport sector was the biggest contributor in the drop with prices falling by 1.4% on the year to November, there was a 0.5% rise in October. The price of petrol fell by 4.1p on average to £1.51 per litre. Additionally, diesel prices fell by 3.2p to £1.59 per litre.
Prices in the recreation and culture sector fell by 1.1% to 5.5%, contributing to the fall in inflation from October’s level of 6.6%. In comparison, prices rose 0.6% a year ago.
Falling food and non-alcoholic drink prices have also been a contributing factor dropping 0.9% from last month and 0.8% from November 2022.
This is mainly due to a fall in the price of bread and cereals by 0.8%, in comparison to a 1.9% rise a year ago. Although food prices have dropped, they remain high.
Dani Hewson, head of financial analysis at AJ Bell said: ‘Headline CPI fell to 3.9% in November, less than double the Bank of England’s 2% target, which will give markets faith that interest rates will follow the trajectory they’ve already bought into.
‘Looking at rate expectation there’s growing confidence cuts to the base rate could begin as early as March and that by this time next year the economic landscape will look very different.
‘Falling prices at the pump and slowing food inflation played a big part in delivering this bigger than expected drop in the headline number, though food inflation still stands at a whopping 9.2% and that means for most Brits their budgets are still feeling significant strain.’
Richard Carter, head of fixed interest research at Quilter Cheviot said: ‘Comparative to last year, there has recently been a sense of cautious optimism in the air and the inflation figure of 3.9% adds to this. The Bank of England now certainly faces a less daunting task in steering inflation back to its 2% target next year, without necessitating a deep recession.
‘Despite the drop, the broader economic picture remains complex, marred by stagnation and subdued growth prospects.’