Fall in inflation reinforces hope of cut in rates

INFLATION dropped back unexpectedly sharply to its lowest level for over two years last month, reinforcing forecasts for the Bank of England to start cutting interest rates early in 2024.

Official figures showed falling fuel prices and another drop in food inflation drove the Consumer Prices Index (CPI) down to 3.9% in November, from 4.6% in October, and the lowest level since September 2021. It was a far bigger fall than forecast, with most economists expecting inflation to have eased back to 4.3% last month.

The pound dropped after the figures from the Office for National Statistics (ONS), down 0.6% at $1.27 and 0.3% lower at €1.15, as the steep decline was seen as bolstering the case for policymakers at the Bank to begin bringing rates down in the first half of next year.