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2025-12-17 17:17:24
[Inflation Plunge Triggers Expectations of Interest Rate Cut, Pound Sterling and UK Bond Yields Fall] ⑴ UK November CPI unexpectedly fell sharply to 3.2% year-on-year, far below the expected 3.5% and the previous month's 3.6%, marking the lowest level since March. ⑵ All sub-indices were weaker than expected, with core CPI slowing to 3.2%, service price inflation falling to 4.4%, and food and non-alcoholic beverage inflation also falling to 4.2%. ⑶ Following the data release, the market reacted sharply, with the pound sterling falling more than 0.5 cents against the dollar, and the interest rate futures market almost entirely pricing in a 25 basis point rate cut to 3.75% by the Bank of England on Thursday (December 18). ⑷ This unexpected decline in inflation was partly attributed to lower food prices (such as pastries, biscuits, and cereals) and the temporary impact of "Black Friday" promotions, but its overall weakness reinforced market expectations of further easing. (5) Despite some arguing that some downside factors may reverse in the coming months, inflation data across the board falling short of the Bank of England’s own forecasts has made a rate cut tomorrow a certainty and increased market bets on further rate cuts in 2026.
