UK Inflation Drop Fuels Rate Cut Expectation

UK inflation fell unexpectedly to 3.2% in November, prompting expectations of a Bank of England rate cut. Falling prices for food and clothing, aided by Black Friday discounts, contributed to the decline. The inflation drop was sharper than economists' forecasts, affecting currency and future interest rate predictions.

The United Kingdom saw a sharper-than-expected decline in inflation, dropping to 3.2% in November, the lowest since March. This has set the stage for a likely interest rate cut by the Bank of England, as markets respond to falling prices in food, clothing, and tobacco discounts, especially from Black Friday sales.

Data released by the Office for National Statistics showed that the inflation drop was below the predictions of economists in a Reuters poll and the Bank's own forecast. This has led to a drop in the pound against the dollar and stirred market predictions for future rate cuts, suggesting a near 100% chance of a cut on Thursday.

Despite the drop in core inflation and services prices, the inflation rate remains higher than in many advanced economies. Measures announced in the government's budget are expected to eventually ease inflation, but structural issues, such as wage growth and labor market participation, continue to affect the longer-term outlook.

(With inputs from agencies.)