Bank of England rate cut is all but nailed on as inflation unexpectedly drops to 3.2 per cent 17 December 2025 CPI fell to 3.2 per cent in November, from 3.6 per cent in October, beating market and Bank of England expectations for a smaller fall and all but guaranteeing another interest rate cut from the Bank tomorrow, according to the Resolution Foundation this morning (Wednesday). The 0.4 percentage point fall in CPI exceeded forecasts from the Bank of England (of 3.4 per cent) and the market (3.5 per cent) as household essentials such as food and clothing made a large downward contribution. Most significantly, there was a welcome drop in the price of food – not just a slowing in the rate at which food prices were rising. On a monthly basis, food and non-alcoholic beverages prices fell by 0.2 per cent in November 2025, compared with a rise of 0.5 per cent at the same time last year. Although inflation is falling, real regular pay has only risen 0.8 per cent in the year to October, leaving many households under financial pressure. Meanwhile unemployment has increased to 5.1 per cent, nearly reaching its pandemic peak and marking the highest rate outside that period since early 2016. With sharply-falling inflation and rising joblessness an interest rate cut from the Bank is surely nailed on, but any benefits may be unevenly distributed, especially across generations. Households led by 65-74-year-olds have five times more savings and one-fifth the debt of those led by 25-34-year-olds. This means younger people are hit harder by higher interest on debt, without seeing much benefit from rising savings rates. Additionally, only 6 per cent of 25-34-year-old mortgage holders have variable rates – most will wait months for lower housing costs, unlike the third of older borrowers with variable mortgages. James Smith, Research Director at the Resolution Foundation, said: “Today’s unexpectedly large drop in inflation marks the slowest rate of price rises since the spring, clearly signalling that we’re well on our way back towards the Bank of England’s 2 per cent target. “But the contrast between falling inflation and stalling real wages shows the cost of living crisis isn’t over. Families are still struggling, despite a welcome drop in the price of food between October and November. “Sharply-falling inflation and a worrying rise in unemployment show that the Bank of England should press ahead with cutting interest rates .”
