What next? We’re likely to see headline inflation edge higher again in December, helped by an artificial boost from airfares. Christmas usually pushes up flight prices significantly, but last year the timing of when these prices were measured meant the increase was recorded as considerably more modest than usual. That is unlikely to be the case again this year, though, needless to say, this is just a temporary quirk.
Noise aside, this latest drop in inflation fits into a broader body of evidence suggesting that price pressures are cooling. We expect headline inflation to fall pretty close to 2% by May.
Taken together with the rapid slowdown in wage growth, we think it will become increasingly clear that the UK is becoming less of an outlier on inflation. After a rate cut at Thursday’s meeting, we expect two further cuts in February and April 2026.