Columns of the Royal Exchange Company dressed in Christmas attire, at the Bank of the City of London, the capital's financial district, on November 20, 2024, in London, England.
Richard Baker | In pictures | Getty Images
LONDON – The UK inflation rate rose to 2.6% in November, the Office for National Statistics said on Wednesday, marking the second straight monthly increase in the headline figure.
The reading was in line with expectations of economists polled by Reuters, and rose from 2.3% in October.
Core inflation, excluding energy, food, alcoholic beverages and tobacco, was 3.5%, slightly below the Reuters forecast of 3.6%.
Headline price hikes reached a three-and-a-half-year low of 1.7% in September, but are expected to rise in the following months, partly due to increased energy price caps set by regulators this winter.
“This upward trajectory looks set to continue over the next few months,” Joe Nellis, an economic consultant at accounting firm MHA, said in email comments on Wednesday, pointing to the energy market and the “long-term pressure of a tight domestic labor market.”
Nellis added that these structural issues “will be exacerbated by recent decisions taken by the government”, including higher public sector pay settlements, increases in the minimum wage and pressure on businesses due to increased employer tax contributions.
Persistent inflation in the services sector, the dominant part of the UK economy, sent financial markets pricing in almost no chance of a rate cut during the Bank of England's final meeting of the year on Thursday. These bets were cemented earlier this week when the Office for National Statistics reported that regular wage growth rose to 5.2% over the August-October period, up from 4.9% over the July-September period.
November data showed services inflation unchanged at 5%.
Research group Capital Economics said the version “strongly rules out” a Bank of England rate cut in December.
George Dibb, associate director for economic policy at the Institute for Public Policy Research (IPPR), said by email that overall inflation numbers were broadly in line with the Bank of England's expectations.
“The real concern is weaker-than-expected growth in the UK, which is now lagging the bank’s own forecasts,” Dib said.
The British economy unexpectedly contracted by 0.1% in October, the second consecutive monthly contraction.
The British pound continued to trade down 0.06% against the US dollar and down 0.19% against the euro after the print edition.
If the Bank of England leaves monetary policy unchanged in December, it will end the year with just two cuts to its key interest rate, rising from 5.25% to 4.75%. Meanwhile, the European Central Bank issued four quarter-point cuts and this month signaled a strong intention to move lower next year.
The US Federal Reserve is widely expected to cut interest rates by a quarter of a percentage point at its meeting on Wednesday, bringing the total cuts for the year to a full percentage point. Some doubts remain about whether it should take this step, given inflationary pressures.
