UK inflation rose to a 2.6 percent annual increase in November, exceeding the Bank of England's 2 percent target and dashing hopes for an interest rate cut at its final meeting of the year. The increase, driven by motor fuel and clothing prices, is the highest since March. Economists and traders now see less chance of interest rate reductions by the Bank of England next year, despite earlier predictions.
UK inflation rose to an eight-month high in November, drifting further above the Bank of England’s 2% target and effectively ending any hope of an interest rate cut at its final meeting of the year.
The data did little to change the outlook for traders, who priced in less easing by the BOE next year after higher-than-expected wage data was published on Tuesday. The market is betting on two quarter-point cuts and sees a roughly 40 percent chance of a third reduction by the end of 2025. That’s up from a 25 percent chance on Tuesday but still far below the 90 percent implied probability seen earlier this week.
“Coming on the back of the stronger-than-expected rebound in wage growth in yesterday’s release, there is almost no chance of the Bank of England delivering an early Christmas present with another interest rate cut tomorrow,” said Paul Dales, chief UK economist at Capital Economics. This week’s data “mean that the Bank won’t be able to worry less about inflation for a while yet,” he added.
Services inflation—closely watched by BOE rate-setters for signs of lingering pressures—remained stubbornly high at 5 percent. The BOE had expected 4.9 percent.
Inflation UK Economy Interest Rates Bank Of England Stagflation
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