In a significant boost for households and the economy, the pace of price rises across the United Kingdom slowed sharply last month, opening the door for the Bank of England to cut interest rates.
Supermarket Wars Drive Downward Surprise
Official data released on Wednesday, 17 December 2025, by the Office for National Statistics (ONS) showed the headline Consumer Prices Index (CPI) inflation rate fell to 3.2% in November. This was a notable drop from October's 3.6% and came in lower than economists had predicted.
The primary force behind the decline was a fierce battle for customers among supermarkets in the run-up to the crucial Christmas trading period. This price war led to significant downward pressure from food costs. ONS chief economist Grant Fitzner highlighted particular decreases in the prices of items like cakes, biscuits, and breakfast cereals.
"Tobacco prices also helped pull the rate down, with prices easing slightly this month after a large rise a year ago," Fitzner noted. "The fall in the price of women's clothing was another downward driver."
Bank of England Set to Act
The sharper-than-expected slowdown effectively locks in a widely anticipated decision by the Bank of England's Monetary Policy Committee. Financial markets now overwhelmingly expect a reduction in the base rate from 4% to 3.75% when the Bank announces its decision on Thursday. This would mark the lowest level in almost three years.
The Bank has been cautiously awaiting concrete evidence that inflationary pressures, particularly from strong wage growth, are subsiding before committing to cuts. The latest figures, including encouraging slowdowns in core inflation measures that strip out volatile food and energy prices, will provide that reassurance.
Chancellor Rachel Reeves welcomed the news, stating: "I know families across Britain who are worried about bills will welcome this fall in inflation. Getting bills down is my top priority." She cited her budget actions, including freezing rail fares and cutting energy bills, as contributing factors the Bank of England agrees will help lower prices further.
Broader Economic Context
The inflation data arrives amid a mixed economic backdrop. Recent labour market statistics have shown increasing weakness, with the unemployment rate rising by a full percentage point to 5.1% since the Labour government took office.
Separate ONS figures have also revealed that the UK economy contracted for two consecutive months in the lead-up to Chancellor Reeves's second budget. This combination of slowing inflation and a cooling economy strengthens the case for the central bank to provide stimulus through lower borrowing costs.
The inflation spike witnessed earlier in the year, partly attributed to businesses passing on higher employment costs from the government's first budget, now appears to be firmly in retreat. This clears the path for the Bank of England to focus on supporting economic growth.
