UK households have been dealt a minor reprieve from soaring prices as CPI fell to 10.7% in the year to November 2022, down from 11.1% in October.
GBP/USD rose on the news after US CPI fell to 7.1% yesterday and raised the question of whether the Fed would start to slow their rates before, or a to a greater degree, than the Bank of England.
Although the rate of inflation fell, prices were rising at an eyewatering pace and putting pressure on the financial health of UK consumers.
The main culprit for rising inflation was again higher fuel and electricity bills while food prices continued to rise.
“News that prices aren’t rising quite as quickly as they were last month is positive news, but they are still rising and at more than twice the rate they were this time last year,” said Danni Hewson, AJ Bell financial analyst.
“There will be much debate about whether the slight dip is a sign that the relentless price rises that households have endured over the last 18 months might finally be coming to an end, but one drop doesn’t signify a trend. Look back just a couple of months when August’s cooling breeze quickly gave way to an Autumn which delivered a 40-year inflation high.”
The lower UK CPI followed the US in seeing inflation fall suggesting global prices were moving in unison to the downside. If a trend is established, it will provide justification for central banks slowing their rate increases.
Perception of the timings of a pivot by each respective central bank will dictate GBP/USD in early in 2023.
The market will receive their first central bank insights in light of the fresh CPI this evening from the Fed and Bank of England tomorrow.