What the inflation drop means for you

Inflation eased in November to 10.7 per cent from the 41-year high of 11.1 per cent in October

The UK’s rate of inflation relented last month as prices rose at a slower pace in the year to November.

The fall to 10.7 per cent from the 41-year high of 11.1 per cent in October is hoped to mark the start of a downward trend.

Though the cost of food and energy remained agonisingly high, new figures showed signs of easing at the petrol pumps and on second-hand car forecourts.

The Office for National Statistics (ONS) data showed that petrol 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 per cent drop in the year to November compared with a 2.7 per cent fall in the year to October.

But in the face of soaring cost pressures, restaurants and pubs were forced to put up prices.

Chief economist at the Office for National Statistics (ONS), Grant Fitzner urged caution, however, warning that is was too early to say whether prices have peaked or not.

“Some may be calling this a peak. It is, I think, too early,” he told BBC Radio 4’s Today programme. “We’ve only seen one fall from a 40 year high, so let’s wait a few months.”

The ONS releases inflation figures every month, and it shows how prices have changed over a 12-month period.

Chancellor Jeremy Hunt said: “Getting inflation down so people’s wages go further is my top priority, which is why we are holding down energy bills this winter through our Energy Price Guarantee Scheme and implementing a plan to help halve inflation next year.

“I know it is tough for many right now, but it is vital that we take the tough decisions needed to tackle inflation - the number one enemy that makes everyone poorer.

“If we make the wrong choices now, high prices will persist and prolong the pain for millions.”

But what does news of an inflation drop mean for you?

In most simple terms, high inflation means your money is worth less in real terms that it used to be – meaning you can purchase less for the same amount of cash. But a falling rate of inflation does not mean prices are dropping - just that they are not rising as quickly.

And rising inflation is especially troublesome to consumers when inflation overtakes wage growth, as you need more money to make up the difference for the surging cost of necessities.

Official figures on Tuesday showed that regular pay, excluding bonuses, rose by 6.1 per cent in the three months to October - but this marked a 3.9 per cent drop after CPI inflation is taken into account.

In addition, interest rates are likely to be put up, sending mortgage deals and borrowing rates skyrocketing.

It is expected that the Bank of England will attempt to temper the high inflation by raising interest rates, which currently stand at three per cent, to 3.5 per cent in order that households be more tight-fisted with spending habits.

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 per cent - far higher than that experienced by the richest households, at 9.4 per cent.