… assuming United Kingdom inflation of 3.2% in the year leading up to November 2025. This data is provided by the Office for National Statistics (ONS). This figure is still above the Bank of England’s inflation target of 2%, leading to questions about the long-term stability of the UK economy. Inflation in the United States was 3% in September—up from 2.9% in August. The UK’s current inflation rate has shown a decline from the previous month’s Consumer Prices Index (CPI) annual inflation rate of 3.6%.
Inflationary pressures in the UK have outlasted 2022. This recent trend is largely a result of pent-up demand for oil and gas following the COVID-19 pandemic. The fallout from Russia’s invasion of Ukraine and the associated geopolitical tensions have drastically raised energy costs. Consequently, their inflation rates are shooting up as well. The Bank of England has responded vigorously to the threat to economic stability. Their reaction was to raise interest rates, now at an unprecedented 16-year high of 5.25%, only after inflation completely galloped above their target.
In recent months, the Bank of England has adjusted its monetary policy, reducing the target interest rate to between 3.50% and 3.75%, marking its lowest level in three years. This change is in line with broader trends in Europe. The ECB does not plan to raise rates again on June 2024, when it lowered its main interest rate by a quarter point from an all-time 4% high to 3.75%. In the US, the Federal Reserve responded with a 0.25 percentage point cut to its key lending rate. This change moved the rate into a range of 3.75% to 4%.
Even with these controls, inflation in the UK has been persistently low on the Bank of England’s hands. As measured by a range of economic indicators, including state revenue growth, we are seeing the economy largely standing still and the jobs market weakening in recent months. The comparable core CPI for the UK reached 3.2% for the year to November. That’s a dip from the previous 3.4% reported in October.
ONS records the price dynamics across the economy, including food and fuel. These three pieces are key to understanding the ways inflation is harming our everyday experience right now. As Christine Lagarde, President of the European Central Bank noted, recent data indicate inflation was 2.1% across Eurozone countries in November. This signals at least some degree of stability in the Eurozone, despite rising rates elsewhere.
The Bank of England is impressively using their current, persistent challenges. It has been under fire and under the microscope for its overall inflation-fighting strategy and plans to foster economic growth. The disparities between inflation rates in the UK and those in other countries such as the US and EU raise questions about underlying economic conditions and potential policy responses.