(CTN News) – Finally, the United Kingdom has experienced a significant decrease in inflation, bringing it closer to countries like France.
While the headline figure of 3.9% last month still exceeds the Bank of England’s target of 2%, it is a substantial improvement from the peak of 11.1% in October of the previous year and below the 5.3% target set by Rishi Sunak for the end of 2023.
Furthermore, there have been notable Inflation price drops in various goods.
Supermarket items such as white and wholemeal sliced loaves and packs of cakes have seen a decrease in prices between October and November, reversing the trend from the same period last year.
However, it is important to acknowledge that many individuals and organizations, including unions, think tanks, and the Labour party, have highlighted the ongoing cost of living crisis over the past two years.
Food prices, for instance, were 29% higher last month compared to September 2021, and energy prices saw a staggering 66% increase.
These factors contribute to the findings of a recent survey conducted by the Resolution Foundation think tank, which revealed that twice as many families reported a worsened financial situation in the autumn compared to those who reported an improvement.
The decline in food costs can be attributed, in part, to the downward Inflation trend in oil prices, which significantly impacts transportation companies’ budgets.
Recent drops in oil prices are primarily a response to reduced demand in Asia and Europe, where high interest rates have affected consumer and business spending. However, concerns arise due to the recent halt in shipping traffic through the Red Sea following attacks by Houthi rebels protesting against Israel’s actions in Gaza.
This disruption could potentially lead to a rise in energy and supply chain costs once again.
The National Institute of Economic and Social Research says UK services companies are not reducing price increases despite high interest rates, indicating progress is needed for inflation to align with the Bank of England’s target.
Some services companies attribute their price hikes to higher staff wages, resulting in only a slight decrease in core inflation.
The Bank of England is concerned about services companies passing on higher costs in 2024, leading to its decision to maintain high interest rates.
Investors predict interest rate cuts in May or even March, creating a disconnect with interest rate setters. Central bankers are hesitant to hint at rate cuts to avoid complacency and increased consumer demand.
France’s economic slowdown raises concerns about unemployment and social unrest, which could also impact the UK if services companies continue passing on higher costs.