Inflation drops sharply to 3.2% in November after food prices fall

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Like the waistband on a dieter, food changes helped inflation shrink notably in November.

“It’s following the path the Bank of England had forecast – peaking in September and gradually moving south.

“However, it’s moving faster than had been expected, which means tomorrow’s rate cut is all-but nailed on. It could persuade borrowers and savers to take action.

“Food prices helped fuel the fall. After rising the previous month, food inflation fell to 4.2 per cent.

“Your experiences at the supermarket will still depend enormously on what you buy. Striking annual rises included beef and veal up 27.7 per cent, whole milk up 14.8 per cent and butter at 12.1 per cent.

“Cattle farmers are still feeling the financial impacts of a poor grass harvest – as well as increased labour costs throughout the production and sales process.

“Festive favourites face a more mixed picture, with the price of chocolate up 17.3 per cent but poultry up just 3.3 per cent, cheese up 2.2 per cent, potatoes up 0.5 per cent and sauces down 0.3 per cent.

“Christmas dinner may not be much more expensive than this time last year, but the sweet treats could bust the budget.

“Alcohol and tobacco inflation also fell. Some of this will be booze discounting ahead of Christmas, to get people through the doors of the supermarkets, but duty changes play a big role, because tobacco duty is hiked in the aftermath of the autumn Budget.

“By the time the data was collected last year it had taken effect, but this time round it hadn’t.

“Black Friday discounts were heavier this year, pushing clothing and footwear prices lower. They were down 0.6 per cent in the year.

“Sluggish sales persuaded retailers that they had to work harder to get people through the doors, so discounts were heavier this year – particularly for women’s clothing and shoes.

“Energy prices continued to spark lower inflation, as a lower energy price cap rise in October than the year before mean electricity prices are up just 2.8 per cent and gas prices 2.1 per cent.

“The Budget brought some good news for energy bills, with the removal of charges that are expected to cut the cost by £150 a year from April. Given that otherwise the forecast was for a rise in the price cap in April, this will be a relief for hard-pressed bill payers.

“If you’re in the market for a remortgage, this will be music to your ears. Lenders have been battling for business and cutting rates left, right and centre.

“Rates on two-year fixed-rate deals are inching ever-closer to 3.5 per cent. The banks are factoring in a rate cut this week, so it won’t make a huge difference in itself. It’s the fierce competition in the market pushing rates lower.

“If you’re set for an imminent remortgage, and you’re coming off a 2-year deal, you may well see your rate fall, putting valuable cash back in your pocket.

“If you’re moving from a five-year deal, you have escaped the worst of the mortgage pain for the past five years, and although you will see repayments rise, it might not be anywhere near as bad as you feared.

“If you’re set to see higher payments, it’s worth calculating in advance how you will afford the extra cost.

“Given that the HL Savings & Resilience Barometer shows that single homeowners have an average of just £73 left at the end of the month, there will be some difficult compromises ahead for some people.”