UK is expecting interest rates to fall sharply next year following news of a much bigger than expected fall in the UK’s annual inflation rate to 3.9% in November.
Despite the Bank of England’s insistence that it is too early to contemplate reducing the cost of borrowing, the markets believe Threadneedle Street will deliver at least four interest rate cuts during 2024. Share prices in London rallied strongly after cheaper fuel and less expensive food helped bring inflation from 4.6% in October to its lowest since September 2021.
The Bank of England has been talking tough, but price rises appear on a rapid decline back towards the Bank’s target range and it may soon be that the risk for rate-setters is not under-tightening but over-tightening.
Cheaper fuel was the main reason for the dip in the headline rate below 4% in November, with the average price of petrol falling by four pence a liter month on month.
However, overall food prices rose by 0.3% month on month and are still up annually – by 9.2%, compared with a 10.1% rate in October.
