Bigger-than-expected drop in both headline and core inflation fuels speculation over possible interest rate cuts next year.
This morning we saw the largest monthly drop in UK inflation in over 30 years, reinforcing the narrative that central banks have reached the peak in rates. While the steep fall is partly attributable to energy regulator Ofgem lowering the price cap on household bills, both headline and core inflation rates came in less than expected at an annualised 4.6% and 5.7% respectively, compared to 6.7% and 6.1% the previous month.
Prime Minister Rishi Sunak can claim one of his policy goals for this year has been achieved, with no doubt a huge sense of relief following his latest tussle with the ousted former Home Secretary Suella Braverman. It brings the likelihood of cuts in interest rates from the Bank of England slightly nearer next year, to late Spring, assuming this pace of declines in inflation can continue.
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