UK inflation, November 2024

Columns of the Royal Exchange are dressed for Christmas at a bank in the City of London, the capital's financial district in London, England, on November 20, 2024.

Richard Baker | In photos | getty images

LONDON British inflation rose to 2.6% in November, the Office for National Statistics said on Wednesday. This marks the second consecutive monthly increase in the headline figure.

This figure is consistent with the forecasts of economists polled by Reuters and is up from 2.3% in October.

Core inflation, excluding energy, food, alcohol and tobacco, was 3.5%, just below the Reuters forecast of 3.6%.

Headline price growth in September was 1.7%, the lowest in three-and-a-half years, but was expected to rise further next month, partly due to higher energy price caps set by regulators this winter.

“This upward trend is likely to continue in the coming months,” Joe Nellis, an economic adviser at accounting firm MHA, said in emailed comments Wednesday, citing energy markets and “long-term pressure on the tight domestic labor market.”

Nellis added that these structural problems “will be further exacerbated by recent government decisions”, including higher public sector wage settlements, higher minimum wages and pressures on businesses from higher employer tax levies.

Continued inflation in the services sector, a dominant part of the British economy, has money markets pricing in little prospect of a rate cut at the Bank of England's final meeting of the year on Thursday. That bet was firmed up earlier this week when the ONS reported that regular wage growth strengthened to 5.2% in the August-October period from 4.9% in the July-September period.

November data showed services inflation was unchanged at 5%.

Research group Capital Economics said the print “categorically rules out” a rate cut by the BOE in December.

But overall inflation figures were broadly in line with BOE projections, George Dibb, deputy director of economic policy at the Public Policy Institute (IPPR), said in an email.

“The real concern is that UK growth is weaker than expected and currently lags the bank’s own forecasts,” Dibb said.

The UK economy unexpectedly contracted by 0.1% in October, marking its second consecutive month of decline.

Since issuance, the British pound has continued to decline by 0.06% against the US dollar and 0.19% against the euro.

If the BOE maintains its monetary policy in December, it will end the year with only two interest rate cuts, from 5.25% to 4.75%. Meanwhile, the European Central Bank (ECB) has enacted four quarter-percentage-point cuts and this month signaled its firm intention to do so next year.

The U.S. Federal Reserve is widely expected to cut interest rates by a quarter of a point at its meeting on Wednesday, taking interest rates down by 1 percentage point for the year. Some skepticism remains about whether this action should be taken given inflationary pressures.

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