Inflation fell more than expected in November to 3.2 per cent, its lowest level in eight months.  

The Consumer Prices Index (CPI) has steadily risen over the last year and has stubbornly stayed at almost double the Bank of England's 2 per cent target. 

After months of 'sticky' inflation readings, a fall in the headline rate is welcome news, although prices are still increasing by more than they should. 

November's headline inflation rate is at its lowest level since March, with core inflation at its lowest point since September 2021. 

What do the latest inflation figures mean for you, where does this leave the Bank of England on interest rate hikes, and will inflation stay at a higher rate? We look at all this and more.

What's the latest on inflation?

The headline inflation rate fell for the second consecutive month, driven by lower food prices ahead of Christmas.  

Core inflation - which excludes volatile items like food, energy and alcohol - rose by 3.2 per cent in the 12 months to November 2025. This is the lowest rate since December 2024, when it was also 3.2 per cent. 

Services inflation fell from 4.5 per cent to 4.4 per cent in November.

Food and non-alcoholic beverages made the largest downward contribution to CPI, dropping from 4.9 per cent to 4.2 per cent. Alcohol and tobacco prices fell by 0.07 percentage points. 

But communication prices came in higher, rising from 4.3 per cent to 4.8 per cent in November.  

Grant Fitzner, chief economist at the ONS, said: 'Inflation fell notably in November to its lowest annual rate since March.

'Lower food prices, which traditionally rise at this time of the year, were the main driver of the fall with decreases seen particularly for cakes, biscuits and breakfast cereals.' 

Fitzner added: 'The increase in the cost of goods leaving factories slowed, driven by lower food inflation, while the annual cost of raw materials for businesses continued to rise.'

What does the inflation rate mean for you?

Consumer prices inflation, known as CPI, measures the average change in the cost of consumer goods and services purchased in Britain, with the ONS monitoring a basket of goods representative of UK consumers.

Monthly change figures are given but the key measure that is watched is the annual rate of inflation. The Bank of England has a target to keep this at 2 per cent. 

An inflation spike has hit over the last two years or so, with the CPI rate peaking in October 2022 at 11.1 per cent. 

Higher inflation means the rate of increase in the cost of living is increasing.

Any decline in the inflation rate is to be celebrated though, as it increases the chance of wages, investment returns and savings interest matching or beating inflation - delivering a real increase in people's wealth.

> The best inflation-fighting savings deals 

The main measure by which the Bank of England seeks to control inflation is interest rate rises. Higher inflation decreases the chance of base rate cuts and increases expectations of how high rates will go. 

Expectations that the Bank of England would have to keep raising rates to combat inflation have sent mortgage rates spiralling costing mortgaged homeowners dear.

> How much would a mortgage cost you? Check the best rates 

Will inflation fall again? 

The key question is whether inflation has hit its peak and will continue to fall over the coming months.

November’s inflation reading was ahead of expectations, almost a percentage point lower than the Bank of England predicted almost eight weeks ago.

While slowing inflation is good news for consumers, the reading coincides with Black Friday, and ING is ‘wary about reading too much into this’.

It predicts headline inflation to edge higher again in December, aided by a boost from airfares over the Christmas period.

Rob Wood, chief UK economist at Pantheon Macroeconomics notes that the MPC’s preferred measure of underlying services inflation increased from 4 per cent to 4.1 per cent.

‘There is a lot less news for the MPC in the inflation data than the headlines driven by airfares, hotels and Black Friday discounting suggest.

‘The PMI output price balance, DMP price expectations and BICS prices sold balance all point to underlying services inflation proving sticky in the high 3 per cents or close to 4 per cent.’

In the longer term, ING expects headline inflation to come within the BoE’s target 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.’

Will the Bank of England cut rates again? 

A rate cut in December’s MPC meeting is ‘beyond doubt’, after November’s slowing inflation reading, says Pantheon Macroeconomics.

‘We expect rate setters to look through most of the inflation news because it was driven by erratic and volatile components, and underlying services inflation, both in the data and leading indicators, remains stubborn,’ says Wood.

‘But dovish rate setters will surely take comfort from slowing wage and price inflation and push to keep their guidance to further gradual cuts in Bank Rate unchanged.

It says there is a good chance the MPC cut rates in April, while ING is more optimistic predicting cuts in February and April.

The National Institute of Economic and Social Research added: 'We predict inflation will continue to fall into 2026 as slowing wage growth and disinflationary effects from the recent Budget feed through the economy. 

'The Bank of England will remain cautious about cutting rates further with inflation expected to remain above target for some time, but we still expect a further cut in the first half of 2026.'

What does it mean for your savings?

Inflation means the value of interest earned on savings and investments falls in real terms.

If inflation deters the Bank from cutting its base rate again, then there is a silver lining for savers as rates will remain at a higher level.

However, rising prices erode the real value of people’s savings.

Mark Hicks, Director of Savings, Hargreaves Lansdown said: 'Depending on the Bank’s decision later this week, fixed-term rates could remain relatively supported and continue to offer attractive returns of over 4 per cent for now. 

'We expect fixed rates to remain above 4 per cent over the next few months, as competition within the market keeps rates elevated. It means anyone who doesn’t need a chunk of their savings for a period could consider tying it up to secure a rate. 

'There are some great deals available from online banks and savings platforms, so it’s well worth shopping around.'

> Check the best savings rates in This Is Money's independent tables

What does it mean for your mortgage?

Alice Haine, personal finance analyst at Bestinvest says: 'Lenders are already engaging in a mortgage price war in anticipation of another base rate reduction.

'That combined with a dip in mortgage approvals run-up to November’s Autumn Statement - as buyers and sellers waited to see what property taxes the Chancellor might announce– has fuelled fierce competition among lenders vying for business.

'This is particularly good news for first-time buyers and those preparing to refinance, who may see their affordability improve as more attractive deals return to the market. 

'While the run-up to the Budget was marked by anxiety over potential property tax reforms, the final outcome was not quite as severe as feared.

'That said, the introduction of a ‘mansion tax’ - a council tax surcharge on homes valued above £2 million from April 2028 - will hit the upper end of the market, while the 2-percentage-point rise in property income tax – set to come into effect in April 2027– delivers yet another blow to landlords. Still, more sweeping reforms did not materialise.

'With mortgage rates continuing to fall this month and the prospect of further declines ahead, a more competitive lending landscape offers committed buyers an opportunity to take advantage of sluggish price growth.'

> Compare the best mortgage rates based on your home's value and loan size