Consumer Prices Index CPI Inflation Falls More Than Expected

The Office for National Statistics (ONS) has this morning released UK inflation figures for November 2025.

Last month, inflation fell by 0.2% to 3.6% pa, having been frozen at 3.80% pa for 3 consecutive months.  Today release for November prices presented a larger than expected fall of 0.4% to 3.2% pa.

After three consecutive months of inflation holding at 3.8% pa, it has finally fallen a little to 3.6% pa.  This is still 1.6%pa above the Bank of England’s target of 2.0% pa.

There is some cheer here for the Chancellor. Rachel Reeves as it should lessen the pressure on the Autumn Budget next week and give the Bank of England some room to cut rates on 18^th December 2025.  This should also give the Chancellor some more room as the cost of government borrowing costs and interest payments should fall. Given GDP ‘flatlining’ at 0.1%, although we suspect it is nearer 0%, we hope it gives Mrs Reeves room to stimulate the economy rather than squeeze it.

The old measure of inflation, Retail Prices Index (RPI) has fallen again but by 0.2% to 4.3% after September’s fall of 0.1% pa but it is still ‘day to day’ necessities such as education, alcohol, tobacco, housing costs, food, and non-alcoholic beverages that are ‘hammering’ our pockets.

Falls in Prices

• Clothing and footwear went negative with prices falling by -0.6%.
• Furniture and household goods went negative with prices falling by -0.3%.
• Miscellaneous goods and services down to 2.1%.
• Health down to 2.6%.
• Restaurants and hotels down to 3.5%.
• Transport down to 3.7%.
• Alcohol and tobacco down to 4.0%.
• Food and non-alcoholic beverages down to 4.2%.
• Housing and household services down to 5.1%.

Rises in Prices

• Communication up to 4.8%.

Remained Level

• Education remained level at 7.6%.
• Recreation and culture remained level at 2.9%.

RPI Falls 0.5% pa to 3.8% pa

The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI) and still our preferred measure of real inflation had a huge fall of 0.5% from 4.3% to 3.8% pa and this is the fourth month in succession of it falling.

Comment – Halfway to Recession

The Chancellor’s Budget on 26^th November did little to inspire us or the economy.  There was no real business stimulus, just more ‘stealth’ taxes with allowances frozen and investment income tax rates up. 

We said last month, the Bank of England is ‘walking a tightrope’ and the Chancellor is ‘on the ropes’ and they are swaying.  Gross domestic product (GDP) was -0.1% down in both September and October and we expect a fall in November too, so this would mean we will be halfway to an official recession (2 X consecutive quarterly falls).  In addition, the UK unemployment rate is now 5.1%, its highest rate since the pandemic.  No doubt fuelled by business concerns for taxation, employment rights, massive minimum wage increases and that huge employers’ national insurance contribution increase.

No wonder the UK economy is floundering, but no doubt the current government will blame the last government. The fact also remains that all but 3 of the above 12 sectors measured for inflation are still way above the Bank of England’s target inflation rate of 2.0% pa.

Key dates for us all:

• 18 December 2025: Next Bank of England MPC interest rate decision.
• 18 December 2025: Next European Central Bank interest rate decision.
• 21 January 2026: Next ONS inflation report.
• 28 January 2026: Next Federal Reserve FOMC interest rate decision.