Emmanuel OchayiThe United Kingdom’s inflation rate has risen once again, with the Consumer Prices Index (CPI) reaching 2.6% in November. This is a rise from October’s figure of 2.3%, according to the Office for National Statistics (ONS).
The increase places inflation well above the Bank of England’s 2.0% target, raising questions about the central bank’s next move on interest rates.
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The inflation rise is a setback for the Labour government, which has been striving to strengthen the economy since taking power in July. Finance Minister Rachel Reeves acknowledged the impact of the latest figures, stating, “I know families are still struggling with the cost of living and today’s figures are a reminder that for too long the economy has not worked for working people.”
Inflation’s Impact on Household Costs
The ONS reported that on a monthly basis, CPI rose by 0.1% in November, contrasting with a 0.2% decline seen during the same period last year.
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The biggest driver of this increase was transport costs. This change could lead to higher expenses for households, as transport is a key cost for many families.
Core Inflation and Broader Trends
Core inflation, which excludes volatile items like energy, food, alcohol, and tobacco, climbed to 3.5% in November, up from 3.3% in October.
This increase reflects persistent inflationary pressures in the broader economy, raising fears that prices may remain high for an extended period.
What This Means for Interest Rates
The Bank of England’s Monetary Policy Committee is set to decide on interest rates on Thursday. Experts predict that the rise in inflation, coupled with stronger-than-expected wage growth, will likely prevent the Bank from cutting interest rates.
Paul Dales, chief UK economist at Capital Economics, commented, “The further rebound in CPI inflation… could have been worse. But 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.”
Recent Interest Rate Moves
The Bank of England last reduced interest rates in November, cutting them by 25 basis points to 4.75%. This followed a similar reduction in August, marking the first rate cut since early 2020, when rates stood at a 16-year high of 5.25%.
While these cuts were aimed at supporting economic growth, the latest inflation data could prompt a shift in policy.
Looking Ahead
With inflation remaining above target and wage growth outpacing expectations, the Bank of England faces a tough decision.
Households are already feeling the pinch from rising living costs, and any delay in rate cuts could add further strain. All eyes are now on the Bank’s Thursday decision, which could set the tone for economic policy in the months ahead.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
