Does easing inflation mean the worst of the price hikes are over?
The fall in the Consumer Prices Index to 10.7% last month is hoped to mark the start of a downward trend.
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Your support makes all the difference.November’s easing rate of inflation has prompted many experts to declare that the worst of the cost of living crisis has passed.
The fall to 10.7% from the 41-year high of 11.1% in October is hoped to mark the start of a downward trend.
But it has come as scant relief for households and businesses, who are still facing eye-watering prices across the board.
Here we look at the key questions surrounding the official figures.
– Why did price rises ease in November?
The Office for National Statistics (ONS) said the decline in the Consumer Prices Index (CPI) was driven by falls in the price of petrol and diesel, as well as second-hand cars.
The data showed petrol prices remained unchanged between October and November this year, at 163.6p a litre on average, but rising by 7.2p a litre a year earlier.
Diesel price increases also eased, rising by 4p a litre this year to 187.9p, compared with a larger rise of 7.4p a litre a year ago.
Second-hand car prices likewise helped CPI fall back, with a 5.8% drop in the year to November compared with a 2.7% fall in the year to October.
But a falling rate of UK inflation does not mean prices are dropping – just that they are not rising as quickly.
For example, petrol and diesel prices are still much higher than they were a year ago – at 163.6p and 187.9p a litre respectively, compared with 145.8p and 149.6p a litre in November 2021.
– Is the worst behind us?
The figures give hope that the peak in inflation has passed. Economists believe that price rises will continue to slow over the coming months and throughout 2023.
Petrol prices have come down as oil prices have fallen due to demand concerns amid a global economic slowdown, with other commodity prices also on the descent.
Samuel Tombs at Pantheon Macroeconomics believes CPI will drop gradually to around 8% next April and 3% by the end of 2023.
But price rises are not slowing across the board, with food inflation hitting a 45-year high last month of 16.4%, while power costs remain painfully elevated.
– Does this all mean the cost crisis is over?
Sadly, it will still be a very tough winter for UK families with inflation remaining close to a 40-year high despite November’s drop.
The price of many essentials are still sky high, especially for food and energy.
While Government support has limited the annual average bill to around £2,500 since October, this is still a massive increase on power costs on a year ago – and the cap will increase further to £3,000 a year from next April.
Analysis by the Resolution Foundation think tank also reveals that it is the poorest that are suffering the most.
It has found that the effective inflation rate for the poorest families is desperately high, at 12.1% – far higher than that experienced by the richest households, at 9.4%.
– Are wages keeping up with inflation?
Unfortunately not. The cost crisis is being compounded by the fact that pay rises are falling woefully behind price hikes.
Official figures on Tuesday showed that regular pay, excluding bonuses, rose by 6.1% in the three months to October – but this marked a 3.9% drop after CPI inflation is taken into account.
– What does falling inflation mean for interest rates?
The Bank of England will no doubt be encouraged by November’s inflation fall, but is not seen taking its foot off the pedal just yet.
Economists predict it will still look to hike interest rates once again on Thursday, from 3% to 3.5% to help rein in inflation further.
But some believe the pace of hikes will slow after this month, with inflation abating and the UK expected to be in a recession throughout 2023.