British consumer price inflation unexpectedly dropped to 3.2% in November from 3.6% the month before, official data showed on Wednesday, cementing expectations for the Bank of England (BoE) to cut rates on Thursday.
A Reuters poll of economists had shown a median forecast of a fall to 3.5% in November's annual inflation rate, though the BoE at the start of the month had pencilled in a slightly bigger drop to 3.4%.
Financial markets had been pricing in a more than 90% chance of the BoE cutting rates by a quarter point to 3.75% on Thursday, though many economists see the decision as more finely balanced.
Last month, the BoE's Monetary Policy Committee voted 5-4 to keep interest rates on hold, breaking the quarterly cadence of rate cuts in place since 2024, and economists expect a December rate cut by only a narrow 5-4 margin.
Of those members who opposed a cut in November, Governor Andrew Bailey looks most likely to switch votes as he said in minutes of the decision that he wanted to see further falls in price pressures "this year" before backing a cut.
British inflation has been higher than in other major advanced economies and in November, the central bank forecast it would remain above its 2% target until the second quarter of 2027.
Since then, Treasury chief Rachel Reeves announced measures in her Nov. 26 budget that will shift climate change costs away from levies on energy bills towards general taxation.
BoE Deputy Governor Clare Lombardelli said these might temporarily lower inflation by up to half a percentage point from April 2026 – potentially allowing the BoE to hit its CPI target sooner – but do little to change the longer-term outlook.
