UK inflation cooled faster than expected in November, adding momentum to market expectations that the Bank of England will cut interest rates at its next decision on 18 December 2025.
The Office for National Statistics data showed CPI inflation fell to 3.2% in November from 3.6% in October, undershooting both economists’ forecasts and the Bank’s own projection. The drop was driven by easing food price rises and discounting effects around Black Friday, alongside softer prices in categories including clothing and some grocery staples.
Financial markets reacted swiftly: sterling weakened and government bond yields fell as traders moved to price in a near-certain quarter-point cut—widely expected to take Bank Rate down to 3.75%. Commentary in UK media framed the decision as an “early Christmas present” for the chancellor, with slowing inflation offering the Bank more room to support a stalling economy.
Even so, economists warned the downside surprise may prove partly temporary if discounting unwinds, and inflation remains above the Bank’s 2% target—meaning any path to further cuts in 2026 could still be cautious.
