UK inflation dipped to 10.7 per cent in November as an easing in the rise in petrol prices helped to lower the rate from a 41-year high of 11.1 per cent last month.
The figure was better than an expected 10.9 per cent and economists said the annual inflation rate had now probably passed its peak, with the sharp price rises of the past 18 months coming to an end.
The fall in the rate will not ease the cost of living crisis, however, because the level of prices has not dropped and the decline in inflation instead reflects some of the increases in prices a year earlier dropping out of the annual calculation.
Grant Fitzner, the Office for National Statistics chief economist, said: “Although still at historically high levels, annual inflation eased slightly in November.” He said downward momentum from smaller petrol price increases in November than a year earlier was offset by continued sharp rises in prices in restaurants, pubs and cafés.
Economists said the drop in core inflation — excluding energy, food, alcohol and tobacco — from 6.5 per cent in October to 6.3 per cent in November was a further positive sign that underlying price pressures were moderating.
Paul Dales, UK economist at Capital Economics, said: “Inflation eased in six of the 12 main categories, which provides some encouragement that it is not a one-off.” Most of the drop came in goods prices, where international supply chain pressures have eased, but services inflation held steady at 6.3 per cent, he added.
Kitty Ussher, chief economist at the Institute of Directors, said the figures gave hope that the UK “may soon be through the worst of the inflationary peak”.
With the inflation rate still in double digits and far above the Bank of England’s 2 per cent target, few thought the figure would persuade the central bank to radically change course on raising interest rates.
Most economists expect a 0.5 percentage point increase on Thursday to 3.5 per cent as the BoE battles continued inflationary pressures. The meeting will give its Monetary Policy Committee the chance to signal whether it thinks that financial markets are still right to expect a peak interest rate of 4.5 per cent.
With prices still much higher than a year ago, there was no let up in the cost of living crisis facing many households.
Jack Leslie, senior economist at the Resolution Foundation, said: “With price rises still massively outstripping pay rises — and Britain’s poorest families facing an inflation rate of over 12 per cent — families are still getting poorer month on month, and the cost of living crisis will continue to deepen in 2023.”
Frances O’Grady, TUC general secretary, called on ministers to do everything to get pay rising. “But instead, ministers are holding down pay across the public sector and refusing to negotiate with workers and their unions,” she said.
But chancellor Jeremy Hunt insisted it was right to hold the line on public sector pay and strikes.
In a statement on Wednesday morning he said: “I know it is tough for many right now, but it is vital that we take the tough decisions needed to tackle inflation — the number one enemy that makes everyone poorer. If we make the wrong choices now, high prices will persist and prolong the pain for millions”.