Prices in the UK rose by 3.2% in November, down from 3.6% recorded in October.
Despite this, inflation remains significantly higher than the 2% target set by the Bank of England.
The Bank changes interest rates up and down to try to keep inflation at this level. Five cuts since August 2024 have led to lowering interest rates to 4%, and a sixth is expected at the Bank’s next meeting this coming Thursday.
What is inflation?
Inflation is the increase in the price of something over time.
For example, if a bottle of milk costs £1 but costs £1.05 a year later, then the annual inflation for cow’s milk is 5%.
How is the inflation rate measured in the UK?
The Office for National Statistics (ONS) tracks the prices of hundreds of everyday products, including food and fuel.
This virtual basket of goods and services is updated regularly to represent the latest shopping trends; virtual reality devices and yoga mats were added in 2025, while local newspaper advertisements were removed.
The ONS calculates price changes over the past 12 months to determine the inflation rate.
The main measure of inflation is called the Consumer Prices Index (CPI), and the latest data on it is released every month.
What is happening to the UK inflation rate?
The Bank also considers other measures such as “core inflation” when deciding whether and how to change interest rates.
This does not include food or energy prices as they are often very volatile, making it a better indicator of long-term trends.
Core inflation stood at 3.2% in the 12 months ending in November, a slight decrease from 3.4% in the 12 months ending in October.
Why are prices still rising?
Although inflation has shrunk significantly since the peak in October 2022, this does not mean prices are falling – only that the pace of the rise is slower.
Inflation rose massively in 2022 as demand for petrol and gas increased after the coronavirus pandemic, and energy prices rose again when Russia invaded Ukraine.
Inflation then remained significantly above the 2% target, partly due to high food prices.
High food prices remain an ongoing issue.
They rose 4.9% in the 12 months to October 2025, and the ONS said this was the most important factor in the rise in inflation recorded during that period.
However, the figure fell to 4.2% in the 12 months to November, and the ONS said it was one of the largest contributors to the overall inflation rate.
In the 12 months to November, hotel and restaurant costs fell, which also contributed to lowering the figure.
Why does raising interest rates help lower inflation?
When inflation was much higher than its 2% target, the Bank of England raised interest rates to 5.25%, their highest levels in 16 years.
The idea is to make borrowing more expensive, so that individuals and companies have less money to spend. It may also encourage individuals to save money.
As a result, demand for goods drops and prices fall.
But it is a balancing act – increasing borrowing costs threatens the economy.
For example, homeowners face higher mortgage payments, which can outweigh better savings offers.
Companies also borrow less, making them less likely to secure jobs. Some may lay off employees and reduce investment.
In recent months, inflation remained above the Bank’s target while the economy stayed stagnant and the labor market worsened.
For this reason, the Bank chose to cut rates, despite high inflation, to persuade individuals to spend more and companies to invest in creating jobs to stimulate the economy.
What is happening to British interest rates and when will they fall again?
The Bank of England began cutting rates in August 2024, helping to lower interest rates to 4%, where they have remained.
At the Bank’s meeting in November, interest rate commissioners voted 5-4 to keep the rate at 4%.
This was widely expected, as inflation is still above the Bank’s target.
Bank of England Governor Andrew Bailey expressed his preference to “wait and see” if price rises would continue to shrink during 2025.
The Bank must also take the global economy into account. Mr. Bailey has repeatedly warned of the unpredictable impact of US federal tariffs.
However, the fall in inflation in November means most economists believe a rate cut at the upcoming December meeting this Thursday is almost certain.
Are wages keeping up with inflation?
Latest official figures showed that the typical salary in Great Britain grew by more than inflation between August and October.
Annual regular pay growth (excluding bonuses) during the three-month period reached 4.6%.
After taking inflation into account, wages grew by 0.9% between August and October.
Annual regular pay growth for the period was 7.6% for the public sector and 3.9% for the private sector.
What is happening to inflation and interest rates in Europe and the United States?
The United States and Europe have also been trying to limit price rises, but both have interest rates lower than the UK.
The inflation rate for countries using the Euro reached 2.1% in November, according to data from the European Union.
In June 2024, the European Central Bank cut the main interest rate from a lifetime record of 4% to 3.75%, the first drop in five years.
In June 2025, after several other cuts, its main rate reached 2%, where it remained.
Inflation in the US rose to 3% in September, from 2.9% in August, higher than the US central bank’s 2% target.
In October, the Federal Reserve cut the target level for the federal funds rate by 0.25 percentage points, placing it within the range of 3.75% to 4%.
This was the Bank’s second consecutive cut after a series of rate holds for most of 2025.
In December, it cut the target level by another 0.25 percentage points, placing it within the range of 3.50% to 3.75% – its lowest levels in three years.
The Federal Reserve was repeatedly attacked by US President Donald Trump for not cutting rates.
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