RATE SPIKE
UK inflation rises AGAIN ahead of Bank of England rate decision plus what it means for your money
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THE UK's rate of inflation has once again risen above the Bank of England's target.
The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measured 2.6% in the 12 months to November.
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This is up from its 2.3% reading in the 12 months to October and the highest reading since March.
The reading comes just one day before the Bank of England will reveal its interest rates decision.
At the end of October, the amount of tax paid on cigarettes and other tobacco products increased in line with inflation, which was a major driver of higher inflation last month.
Economists also explained that an increase in petrol costs between October and November has added to overall price pressures.
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Motor fuel prices have risen for drivers since the start of this year, with petrol and diesel prices rising by 10 pence per litre since the start of the year.
Grant Fitzner, chief economist, at the ONS said: "Inflation rose again this month as prices of motor fuel and clothing increased this year but fell a year ago.
"This was partially offset by air fares, which traditionally dip at this time of year, but saw their largest drop in November since records began at the start of the century."
It comes after inflation measured 1.7% in September, marking the first time it had fallen below the Bank of England's target in three years.
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The Bank of England has a target of keeping inflation at 2%.
Inflation is a measure of how much the prices of everyday goods such as food and clothes, and services such as train tickets and haircuts, have increased compared to a year earlier.
Figures have cooled since the 11.1% high recorded two years ago, but many households are still feeling the financial strain.
It's important to note that when inflation drops it doesn't mean that prices have stopped rising, it just means they are doing so at a slower pace.
What is the Bank of England base rate and how does it affect me?
Commenting today's chancellor Rachel Reeves said she "knows there is more to do".
“I know families are still struggling with the cost of living and today’s figures are a reminder that for too long the economy has not worked for working people.”
She added: “Since we arrived real wages have grown at their fastest in three years. That’s an extra £20-a-week after inflation.
“I want working people to be better off which is what our Plan for Change will deliver.”
WHAT IT MEANS FOR YOUR MONEY?
Alastair Douglas, the chief executive of Totally Money said expectations are that the cost of living "could keep rising well into the new year."
This has been echoed by economists such as Suren Thiru at the Institute of Chartered Accountants who said November's uptick means that "inflation is on track to top 3% by the middle of 2025".
He added: "With tax rises in the budget, and elevated energy costs likely to increase the upward pressure on prices in the near term."
It also reinforces expectations that the Bank of England will hold interest rates on Thursday.
The likelihood of a hold was floated earlier this week when ONS figures showed wage growth had jumped higher for the first time in more than a year.
Experts said the pick-up in wage growth cements expectations that policymakers will keep the base rate on hold at 4.75% when they next decide later this week.
The base rate is used by lenders to determine the interest rates offered to customers on savings and borrowing costs including mortgages.
Adam Thrower, head of savings at Shawbrook said the "clock is ticking" for savers.
He explained: "It’s a hectic time of year, but taking a moment to review your savings could help ensure your money continues to work hard and stay shielded from inflationary pressures in the year ahead."
The central bank has already cut rates twice this year as inflation has eased back.
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Sanjay Raja, senior economist for Deutsche Bank, cautioned over “pressure building” at the start of 2025 as a result of business taxes rising and a higher minimum wage.
He said: “Looking ahead, we continue to see more upward pressure building – particularly within the services basket as the rise in employer national insurance contributions (NICs), the change in employer NICs threshold, and hikes to the national living wage all start to push prices higher around the start of 2025.”
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we're earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
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