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UK inflation accelerated to 2.6 per cent in November, in line with analysts’ predictions, cementing expectations that the Bank of England will hold rates steady at its meeting on Thursday.
The year-on-year rise in the consumer price index was above the 2.3 per cent recorded in October, as costs of motor fuels and clothing help push the annual rate higher.
The Office for National Statistics data comes as the BoE’s Monetary Policy Committee meets this week to set rates amid signs of a stagnating economy.
GDP has shrunk for two consecutive months, while business surveys point to weaker confidence and curtailed hiring intentions. But a pick-up in UK wage growth has helped quash hopes of an interest rate cut this week.
The rate of services inflation, which is closely watched by the central bank as a gauge of underlying domestic price pressures, was 5 per cent in November, matching October’s figure but below analysts’ expectations of 5.1 per cent.
BoE policymakers have highlighted the persistence of services inflation as a reason to be cautious before lowering interest rates again after the key rate was trimmed to 4.75 per cent in two quarter-point moves this year.
Governor Andrew Bailey has said the BoE will continue to ease policy gradually. Clare Lombardelli, the deputy governor, told the Financial Times in November that she was worried services price inflation had continued to be “well above” rates consistent with the BoE’s 2 per cent target.
The November services price reading was slightly ahead of the BoE’s own 4.9 per cent forecast.
“This inflation increase extinguishes any lingering hopes of an interest rate cut on Thursday, while concerns over mounting inflation risks, including the recent spike in pay growth, mean that a February loosening is not a done deal,” said Suren Thiru, Economics Director at accountants’ body the ICAEW.
“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,” the chancellor Rachel Reeves said.
Following the release of the data, sterling edged down 0.1 per cent to $1.269.