Inflation falls to 3.2%

Inflation has fallen to 3.2% in November - the lowest level in eight months.

That’s the second fall in inflation in a row and a bigger drop than many analysts had expected.

It’s also a further sign that the rate of price increases might have peaked.

What's behind the fall?

The drop in inflation was largely down to a welcome slowdown in food prices, in particular cakes, biscuits and breakfast cereals.

Tobacco and alcohol prices also helped to reduce the inflation rate, along with falls in the prices of clothing and footwear.

What is inflation?

Inflation is a way of measuring how quickly prices are rising. 

When inflation is high, your money doesn’t go as far, and everyday purchases like food, fuel and bills take up more of your budget.

But it’s worth stressing that a drop in inflation doesn’t mean that prices are coming down.

It just means they’re rising more slowly than before.

PM and chancellor welcome drop in inflation

Responding to the figures, chancellor Rachel Reeves said: "I know families across Britain who are worried about bills will welcome this fall in inflation.

"Getting bills down is my top priority.

"That is why I froze rail fares and prescription fees and cut £150 off average energy bills at the Budget this year. 

"The Bank of England agree this will help cut prices and expects inflation to fall faster next year as a result." 

Prime minister Sir Keir Starmer added that the fall is a "step in the right direction", but acknowledged that "many families are still feeling the pressure of the cost of living".

"That’s why my government is taking action to cut costs and make you better off," he said.

How are inflation and interest rates linked?

The Bank of England can change interest rates to bring inflation under control and close to its 2% target.

An increase in interest rates makes borrowing more expensive and encourages households and businesses to save more and spend less.

That can, in turn, help cool price rises.

But if inflation is too low, the Bank of England might go the other way and cut interest rates.

This makes borrowing cheaper, which in turn makes people want to spend and invest more.

At the moment, interest rates are currently at 4%.

The Bank of England is due to announce its next rate decision tomorrow (18 December).

How is inflation measured?

Imagine a shopping basket full of everyday items like bread and milk, along with bigger purchases like cars and televisions.

The ONS tracks the price of what’s in that basket every month - and the headline inflation figure shows how much it’s changed.

How to manage rising costs

If you’re struggling to keep up with your everyday expenses, there are practical steps you can take.

Review your spending

Make sure you know how much money you have coming in and where it’s going.

You can then prioritise your spending and work out where savings could be made.

Check out our guide to how to create a budget to get started, and give our budget planner a try - it’s free and easy to use.

See what benefits you can claim 

You might be entitled to get financial support from the government.

Use our benefits calculator to see what help you could be eligible for.

Tackle problem debts

If you’re feeling weighed down by debt, get in touch for confidential, practical and impartial debt advice.