- Prior +3.6%
- Core CPI +3.2% vs +3.4% y/y expected
- Prior +3.4%
That is an unexpected miss, especially on the core estimate which is the lowest since January. This will just solidify a rate cut by the BOE for this week but also put pressure on perhaps more rate cuts to come if the central bank can start to sell the narrative of a disinflation path going into next year. The pound has stumbled with GBP/USD falling by 0.6% to 1.3345 on the day from 1.3377 just before.
Looking at the breakdown, the big drop stems from food price inflation which fell from 4.9% in October to 4.2% in November. Besides that, goods inflation also eased lower from 2.6% to 2.1% with Black Friday discounts resulting in a decline in clothing and footwear prices of 0.3% on the month and 0.6% year-on-year. Compared to the same month last year, November 2024 saw a rise of 0.6% in clothing and footwear prices on a monthly basis. So, there is perhaps some greater influence in Black Friday discounts this time around in dragging prices lower.
As for services inflation, it is seen declining marginally from 4.6% to 4.5% in November. So, that is still one key sticking point for the BOE in trying to convince of a strong disinflation narrative in the UK economy.
At the balance, there is some good news in the sense that price pressures are easing and starting to show further signs of softening. That especially after months of not showing much progress.
However, unless services inflation also starts moderating more meaningfully, the BOE might still find it tough to push a strong narrative for further rate cuts next year. For now at least, they can comfortably stick to the one this week. But looking out to next year, it will require months of a similar trend in inflation data to support their case.
