Inflation in the United Kingdom surged to an eight-month high in November, according to official data released on Wednesday. While the Bank of England (BoE) took some solace in the

steadiness of core inflation, the broader rise in consumer prices is adding pressure to the economic landscape.

The Consumer Prices Index (CPI) rose to 2.6% in the 12 months to November, up from 2.3% in October, the Office for National Statistics (ONS) reported. This marks a significant jump from September’s 1.7%, which was the first time in over three years that inflation dipped below the BoE’s 2% target.

The November figure, the highest since March, aligns with economists' expectations from a Reuters poll. It further solidifies market predictions that the BoE will likely hold off on cutting interest rates in its upcoming policy meeting.

Broad-based inflation drivers

The inflation increase was driven by widespread factors, most notably rising costs in transportation, particularly fuel and vehicle purchases. These were only partially offset by modest price hikes in airfares and dining out.

The latest data poses challenges for the Labour government, which has struggled to stimulate economic growth since coming into power in July. Finance Minister Rachel Reeves acknowledged the difficulties faced by households, stating, “Today’s figures are a reminder that for too long, the economy has not worked for working people.”

Economists surveyed by Reuters had largely anticipated a slight rise in service price inflation to 5.1%, while the Bank of England (BoE) had forecast a decline to 4.9% for November.

The BoE has indicated it will continue to gradually lower interest rates, even as signs emerge that the British economy is losing steam.

Following the release of the data, the pound briefly dipped against the dollar.

The Office for National Statistics (ONS) reported that core inflation—which excludes energy, food, alcohol, and tobacco—rose to 3.5% in November, up from 3.3% in October.

Paul Dales, chief U.K. economist at Capital Economics, commented, “The rebound in CPI inflation ... could have been worse. However, alongside stronger-than-expected wage growth in yesterday's data, it is highly unlikely that the Bank of England will deliver an early Christmas surprise with another rate cut tomorrow.”

Last month, the BoE reduced its benchmark interest rate by 25 basis points to 4.75%. This followed a rate cut in August, the first since early 2020, which lowered the key rate from a 16-year high of 5.25% as inflation in the U.K. began to stabilize.