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UK Inflation Takes a Surprise Dip: What's Next for BoE Policy?

UK consumer prices for November fell unexpectedly to 3.9% year-on-year, significantly below the anticipated 4.3% rise. This marks the lowest inflation rate since September 2021.

Inflation has eased in all sectors, with food price inflation dropping to single digits (9.2%) for the first time since mid-2022, and service price inflation reaching its lowest point in 2023. This sharp decline in inflation casts doubt on last week's relatively hawkish stance of the Bank of England (BoE), where Governor Bailey resisted the increasing speculation about rate cuts.

Our take: As inflation rapidly subsides globally, real policy rates are on the rise. Consequently, this opens the door for policymakers to consider rate cuts in 2024. However, the market's current expectations for rate cuts seem overly optimistic. The uncertainty surrounding the secondary effects is too high for policymakers to prematurely embark on rate cuts. #UKInflation #BoE #EconomicUpdate #FinanceNews #RateCutSpeculation #MonetaryPolicy


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