UK inflation hit a slightly lower expectation of about 10.7% for November. Cooling fuel costs helped to slow the price pressures, but high energy and food prices continued to squeeze businesses and households. Meanwhile, financial experts had projected an increase of about 10.9% in the annual consumer price index. But October recorded a 41-year high of approximately 11.1%. Thus, the rise in November fell from 2% to 0.4%, below the consensus projection of 0.6%.
The National Statistics Office says the most significant upward CPI contributions resulted from non-alcoholic beverages and housing services such as fuels, gas & electricity. On the other hand, the most considerable downward CPI contributions through November resulted from the transport sector, particularly motor fuels. Thus, the Bank of England is set to announce another monetary policy this week. Experts are predicting a 50 basis point increase.
Generally, they expect central banks to raise interest rates as the economy struggles with the most prolonged recession on record and a sky-high inflation rate. The UK is grappling with widespread industrial protests during the Christmas holiday. Workers are striking to demand better working conditions, and pay rises closer to the inflation rate. The Independent Budget Responsibility Office has predicted the most significant decline in UK living standards.
Overall, the real household income might decline in 2023 by 4.3%. Last month, the UK finance minister announced a sweeping $68 million fiscal plan. It includes a slew of spending cuts and tax rises as officials attempt to plug a large hole in the public finances. Although the dip in CPI figures on Wednesday marks a considerable step in the right direction, the constant challenge of rising household energy bills and food prices remains a major crisis.
Nonetheless, experts have noted that inflation has finally passed its peak following a better-than-expected US consumer price index print on Tuesday. The Bank of England is struggling with a tricky task of slowing down inflation to a 2% target while monitoring the weakening economy. The approach is evident in the UK labor market data officially released last week, indicating an uptick in wage growth and unemployment.
Inflation remains ahead of wages despite falling as the country heads into a new winter, with protests dominating the former national industries and public sector. Above all, financial experts have forecasted a 50-basis point interest rate increase from the Bank of England. The move will take the benchmark rate to about 3.5%. Yet, others have predicted a potential slowing of the rate hike pace in 2023, but inflation remains above the target.
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