UK inflation unexpectedly cools to 3.9 percent, lowest in two years

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Other measures of inflation that are used to assess how deeply entrenched price pressures are in the economy also declined. Core inflation, which excludes energy and food prices that are more volatile and heavily influenced by international markets, fell to 5.1 percent in November, from 5.7 percent the previous month.

Services inflation – a measure of companies' wage costs – cooled slightly, to 6.3 percent.

Inflation has moderated significantly since its peak last year, when the rate topped 11 percent, its fastest pace in four decades. As household budgets were squeezed by high energy and food costs, the Bank of England was in the midst of an aggressive series of interest rate rises to crush inflation.

Recently, the government has argued that the British economy has turned a corner. Inflation is lagging average wage growth, which some say should help ease a prolonged cost-of-living crisis.

“With inflation more than halved, we are beginning to remove inflationary pressures from the economy,” Chancellor of the Exchequer Jeremy Hunt said in a statement. “But many families are still struggling with high prices, so we will continue to prioritize measures that help with cost of living pressures.”

Many households are still feeling the pain of higher inflation. Food prices have increased by 27 percent compared to two years ago and Household energy bills will increase in January.. The impact of higher interest rates is still filtering through the economy, as homeowners pay higher mortgage rates and businesses face higher financing costs.

Inflation in Britain remains about double the Bank of England's 2 percent target and, despite November's unexpectedly large slowdown, remains relatively high compared with its Western European neighbors.

Policymakers at the Bank of England They said last week that they expect to keep interest rates high for a while, and that it was too early to talk about cutting interest rates even though inflation is slowing and the economy is expected to stabilize through 2025. One thing rate setters are focusing on is the persistent strength of wage growth: The average wage rose about 7 percent in the three months to October, compared with a year earlier.

This week, Ben Broadbent, deputy governor of the central bank, warned that authorities needed to see a “longer, clearer decline” in the official salary data before they could be sure that this source of inflationary pressure had subsided.



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