Inflation rose to 2.6% in the 12 months to November, up from 2.3% in October and further away from the Bank of England’s 2% target.
It is the second consecutive month that there has been a jump in inflation. Core inflation, which strips out more volatile food and energy prices, rose from 3.3% to 3.5%, while services inflation remained at 5%.
Meanwhile, the Retail Prices Index (RPI) measure of inflation, which includes housing costs, increased to 3.6% in the 12 months to November, up from 3.4% in October.
The largest upward contribution to the monthly change in inflation came from higher fuel and clothing costs, with the largest offsetting downward contributions coming from motor fuels.
Sarah Coles, head of personal finance, Hargreaves Lansdown said: “Inflation is staying put for now, like an unwelcome Christmas party guest hogging the sofa into the small hours. The question is whether it can be shifted, or if it’s going to hang around to ruin our plans for months – eating us out of house and home and driving up the cost of everything again.
“Transport helped drive inflation up, because petrol prices were higher. The oil price fluctuated throughout the month, partly on the back of geopolitical tensions, but also as a result of the market digesting the likely impact of a Trump presidency on supply and demand.
“Food and drink price inflation rose to 2%. Poor harvests in a number of areas have pushed up the prices of trolley favourites, including olive oil, up 26.6% in a year and chocolate up 9.9%. At the moment, this is offset by price falls elsewhere – with annual drops in the price of everything from rice and pasta to pizza and poultry. However, there’s every chance this could be the calm before the storm on the shelves, as higher employer National Insurance contributions and a bigger minimum wage from April push up employment costs for supermarkets – who may then pass it on to customers. There’s also the impact of rule changes in July which are likely to push up the cost of imports, and then new packaging rules in October to factor into costs. It means the pain at the tills may be far from over.”
You can learn about ways you might be able to reduce the cost of your food bills in our guide 21 ways to save money on your food bills.
What inflation means for you
When inflation rises, this pushes up the cost of living for households making it more difficult for those on low incomes to make ends meet. News that it has risen to 2.6% in the year to November is therefore unwelcome, especially as it has again exceeded the government’s 2% target.
Wage growth continues to outstrip the rate of inflation, with average weekly earnings excluding bonuses at 5.2% higher in the three months to October than a year earllier.
Inflation and your pension
September’s inflation number is usually the considered most important inflation rate of the year for those reliant on the State Pension. That’s because the increase in prices over the year to this point is usually used to calculate the rate at which certain allowances and benefits, including the State Pension, are increased the following April.
Under the ‘triple lock’ guarantee, the State Pension is guaranteed to rise by the highest of September’s inflation figure, earnings growth, or 2.5%. Earnings figures for the three months to July are used for the yearly increase, and given that these stood at 4.1%, that means that the State Pension is due to increase by this amount next April, meaning an annual rise of around £473 for those receiving the new State Pension and £361 for those on the basic State Pension. You can find out more about this in our guide What is the pension triple lock?
However, November’s inflation figures will have an impact on pensioners, who often have to get by on low incomes.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “We’ve had a rough ride on the inflationary rollercoaster in recent years, which can cause challenges for anyone trying to plan their retirement income. Opting for a level annuity may initially deliver the level of income that you need, but if inflation soars then you could find yourself struggling.
“Opting for an inflation-linked product means your income will go up over time, but it will initially be much lower than for a level product, which can be hugely off-putting. For context, the most recent data from HL’s annuity search engine shows a 65-year-old with a £100,000 pension can get up to £7,281 per year from a single life, level annuity with a five-year guarantee. Compare this to an RPI-linked annuity with a starting income of just £4,716.
“It’s a real dilemma, that can be met by adopting a mix-and-match approach that combines an element of certainty with flexibility”.
If you want to learn more about the impact of inflation on your retirement savings, read our article How does inflation affect my pension?
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
What does it mean for interest rates?
The Bank of England raised the base rate fourteen consecutive times since December 2021 to try to dampen inflation, and made its first base rate reduction for over four years in August 2024, taking the rate from 5.25% to 5%. This was followed by a further cut in November which means the base rate currently stands at 4.75%. However, the latest inflation numbers mean that a rate cut in December is unlikely, which will come as a blow to borrowers.
Myron Jobson, Senior Personal Finance Analyst at interactive investor, said: “The already slim chances of an interest rate cut tomorrow have narrowed even further following the latest reading. While the modest rise in inflation was anticipated, the faster-than-expected growth in wages and the surprise fall in GDP give the Bank of England little confidence to lower rates. Cutting interest rates too soon risks undermining progress made in tackling inflation.
“This latest inflation reading highlights that the fight against rising prices is far from over. Inflationary pressures stemming from measures announced in the Budget, such as heavy borrowing, increased public spending, and uncertainties surrounding President-elect Donald Trump’s tariff plans, mean the Bank of England cannot afford to rest easy.”
If you’re worried about a potential payment shock when your current mortgage deal ends, read our articles When is the best time to remortgage? and Are you one of 1.6m homeowners facing a mortgage timebomb?
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
Impact on savers
If you’re trying to save so that you have a financial buffer in place to cover rising costs, our articles How to build an emergency fund and Best instant access savings accounts may come in handy. Fortunately, savings rates remain competitive, so there are still some good rates to be found.
Ms Coles said: “The savings market has been pretty solid for the past month. Unsurprisingly, the average easy access deal has nudged down on the back of last month’s rate cut (from 2.98% to 2.89% according to Moneyfacts). We can expect this process to continue, because the savings market tends to move slowly – inch by inch – over a period of weeks. It means it’s worth keeping an eye on what you’re making on these accounts and being prepared to switch if the rate falls.
“The average 1-year fixed rate deal is still roughly where it was a month ago (4.18% according to Moneyfacts). It means there are still some strong rates out there, so if you have money you want to fix for a period, now is the time to do it. It’s worth checking online banks and savings platforms, where rates tend to be much more competitive than the high street giants.”
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You can learn more about inflation and the impact it has on your finances in our guide What does inflation mean for my money? If you’re looking for ways you might be able to reduce your outgoings, read our articles How to save money – 21 money saving tips and Seven ways to save on your household bills.
Free financial support services
Millions of people are struggling financially at the moment, and although inflation is easing, many are still finding it difficult to manage their outgoings.
If your debts are starting to spiral out of control, contact Citizens Advice to help you find a way forward. You can speak to an advisor through its national phone service Adviceline on 0800 144 8848 if you’re in England, 0800 702 2020 if you’re in Wales, 0800 028 1456 if you’re in Scotland and 0808 223 1133 if you’re in Northern Ireland. Alternatively, contact any of the following specialist debt advice charities:
- National Debtline (telephone 0808 808 4000)
- Debt Advice Foundation (telephone 0800 043 4050)
- StepChange (telephone 0800 138 1111)
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