Falling Oil Price Causes CPI Inflation To Drop To 2.3% In November

The Consumer Price Index (CPI) fell to 2.3% in November as a result of downward pressure from petrol prices, which fell by 2.6 pence per litre between October and November 2018.

CPI had previously remained steady at 2.4% during September and October. 

WTI crude oil has fallen to $46 per barrel in recent weeks, down from $76 earlier in the year. 

As well as falling petrol prices, the largest downward contributions during November came from a variety of recreational and cultural goods and services, according to the ONS.

Will UK energy stocks cause another disappointment?

Upward contributions came "almost entirely" from tobacco, said the ONS, with prices rising between October and November, reflecting a rise in duty compared to a fall between the same months a year ago. 

The rise in duty was reported in Chancellor Philip Hammond's October Budget and came into force one month earlier than it had done in 2017. 

Andrew Wishart, UK economist at Capital Economics, said he expected the fall in inflation could mean the Bank of England reaches its 2% target sooner than expected.

"The 30% fall in sterling oil prices since their recent peak means that the fall in inflation in November, from 2.4% to 2.3%, is probably the precursor of a larger fall in December, perhaps to the 2% target," he commented. 

Thomas Wells, manager of the Smith & Williamson Global Inflation-Linked Bond fund, said: "The UK inflation outlook remains very difficult to call as so much depends on whether or not we get a trade deal with the EU.

"If we do not get a deal, we would expect a slump in the pound followed by a downturn in growth - in other words, a stagflationary environment. Even we do get a deal, some sectors, such as retail, are beginning to look mortally wounded."