Encouraging news on inflation, but food prices remain a particular concern

Commenting on today’s data from the Office of National Statistics, that showed the annual rate of CPI inflation falling from 11.1% in October to 10.7% in November, Kitty Ussher, Chief Economist at the Institute of Directors, said:

“This is encouraging news, giving hope that the UK, like the US, may soon be through the worst of the inflationary peak.

“The main reason for the fall is slowing petrol price rises compared to a year ago. Although prices at the pump did not change much compared to the previous month, we are starting to see the impact of so-called base effects where a particularly large rise a year ago gives a lower annual rise now. It is this mechanism that is expected to bring down the headline rate of inflation going into 2023.

“However, the Bank of England will be concerned that food inflation remains particularly high, running at an annual rate of 16.4% according to today’s data and still rising. On balance we still think the Bank should continue to raise rates, albeit slightly, until the downward path of inflation is firmly entrenched in business expectations.”