The Office for National Statistics released UK consumer price data for November 2026 on Wednesday. Headline CPI came in at 2.6% year-on-year — above the Bank of England's 2% target and slightly higher than October's 2.4%. The uptick was mostly driven by a reacceleration in services inflation, which rose to 5.1% from 4.8% the previous month.
Why services inflation is the Bank of England's focus
The Bank of England's Monetary Policy Report identifies services CPI as the single most important domestic inflation gauge because it captures wage-driven price pressure better than the headline or core measures. Services prices are largely set domestically, tracking labour costs — the unit labour cost growth in the UK is currently running at around 4.5% per year, above the pace consistent with 2% services inflation.
The reacceleration from 4.8% to 5.1% in one month is notable because it reverses a declining trend that had taken services CPI from a peak of 7.4% in 2023. The ONS attributed the November jump mainly to education fees (annual university tuition revision) and restaurant and hotel prices. Stripping out education, the underlying services trend is slightly softer — but MPC members will scrutinise the details closely.
Goods deflation providing temporary relief
Goods CPI printed at −0.4%, meaning manufactured goods prices are actually falling year-on-year. This reflects the global disinflation in goods production — supply chains have largely normalised from the 2021–22 disruptions, and weak demand from China has depressed global factory-gate prices. The contrast with services is stark: while the globalised goods economy is producing deflation, the domestic services economy is generating persistent inflation above target.
This goods-services split is not unique to the UK — it is visible across the US, euro area, and most advanced economies. But in the UK the services problem is amplified by tight labour market conditions and relatively strong wage growth. For a deeper dive, see our UK wages and services inflation explainer.
December Bank of England decision
The MPC meets on 18 December. At the previous meeting in November, the committee voted 8–1 to cut rates to 4.50%. The November CPI print may persuade some members to vote for a hold, given services inflation running above the BoE's own 5% comfort level. Markets are currently pricing a 60% probability of a 25 bp cut. The BoE will also publish its updated Monetary Policy Report in February 2027, which will incorporate the full Q4 2026 data — that report will likely set the pace for 2027 easing.