Surprise Dip in British Inflation Sparks Interest Rate Speculations

British inflation rates dropped unexpectedly to 3.2% in November, stirring speculation about a potential Bank of England interest rate cut. Finance Minister Rachel Reeves has announced budget changes that could lower inflation in the short term, yet longer-term projections remain above the BoE's target.

In a surprising turn of events, official statistics indicate that British consumer price inflation fell to 3.2% in November, down from 3.6% the previous month. The decline adds a new twist a day before the Bank of England's expected interest rate decision, where many predict a potential cut.

While a Reuters poll had predicted a fall to 3.5%, the unexpected drop in inflation has raised discussions about the BoE's next move, particularly after last month's 5-4 vote to maintain rates. Economists now see the decision as delicately balanced, with Governor Andrew Bailey likely to be pivotal.

Policies announced by Finance Minister Rachel Reeves aim to ease energy bill levies. Though these may halve inflation by April 2026 temporarily, the long-term outlook remains high, potentially above BoE's target until mid-2027, Deputy Governor Clare Lombardelli noted.

(With inputs from agencies.)