The UK’s core inflation rate rose by 0.30% month-on-month in November 2025, rebounding from zero growth in October. This figure remains below the 0.40% consensus forecast but is consistent with a gradual reacceleration of inflation pressures in the post-pandemic recovery phase. Over the past 12 months, the average monthly core inflation rate has hovered near 0.25%, making this month’s print slightly above trend. The geographic scope covers the entire United Kingdom, reflecting broad-based price pressures across services and goods sectors.

Drivers this month

• Shelter costs contributed approximately 0.18 percentage points, reflecting rising rents and housing services.
• Transport services added 0.07 percentage points, influenced by higher fuel and public transit fares.
• Used car prices exerted a mild downward drag of -0.05 percentage points, easing from previous months.

Policy pulse

The Bank of England’s 2% inflation target remains challenged by persistent core inflation above 0.25% MoM. The current reading suggests underlying price pressures are not abating, complicating the central bank’s decision-making on interest rates. The 0.30% increase is consistent with a moderate tightening bias but below levels that would trigger aggressive hikes.

Market lens

Following the release, the GBP/USD currency pair depreciated by 0.15% within the first hour, reflecting market disappointment versus expectations. UK 2-year gilt yields edged up by 5 basis points, signaling modest repricing of monetary policy expectations. Breakeven inflation rates for 5 years remained stable, indicating market confidence in medium-term inflation anchoring.

Core inflation is a vital gauge of underlying price trends, excluding volatile food and energy components. The 0.30% MoM increase in November 2025 contrasts with the zero growth recorded in October and the 0.40% estimate, underscoring persistent but moderate inflationary pressures. Year-over-year core inflation remains elevated at approximately 4.10%, well above the Bank of England’s target.

Monetary Policy & Financial Conditions

The Bank of England has maintained a cautious stance, with the base rate at 5.25% as of November 2025. Financial conditions have tightened moderately, with credit spreads widening slightly and mortgage rates rising. The core inflation uptick supports the case for a gradual rate normalization to anchor inflation expectations without derailing growth.

Fiscal Policy & Government Budget

Fiscal policy remains moderately expansionary, with the government running a budget deficit near 3.50% of GDP. Recent measures to support energy costs and public services have added to inflationary pressures but also shielded vulnerable households. The fiscal stance is unlikely to tighten significantly in the near term, sustaining demand-side inflation risks.

External Shocks & Geopolitical Risks

Global supply chain disruptions have eased but remain a source of volatility. Brexit-related trade frictions continue to affect import prices. Geopolitical tensions in Eastern Europe and the Middle East add uncertainty to energy markets, indirectly influencing UK inflation through higher transportation and production costs.

Market lens

Immediate reaction: GBP/USD declined 0.15% post-release, while UK 2-year gilt yields rose 5 basis points, indicating market recalibration of monetary policy expectations. Inflation-linked bonds showed stable breakeven rates, suggesting confidence in medium-term inflation control.

Looking ahead, the UK’s core inflation trajectory hinges on several factors. The Bank of England’s policy response, fiscal measures, and external shocks will shape inflation dynamics over the next 6-12 months. We outline three scenarios:

Bullish scenario (20% probability)

• Core inflation moderates to 0.15% MoM by mid-2026 due to easing supply constraints and subdued wage growth.
• Monetary policy remains steady, supporting growth without triggering recession.
• GBP strengthens, reducing import price pressures.

Base scenario (60% probability)

• Core inflation averages 0.25-0.30% MoM, consistent with recent prints.
• Gradual Bank of England rate hikes continue, balancing inflation control and growth.
• Fiscal policy remains moderately expansionary, sustaining demand.

Bearish scenario (20% probability)

• Core inflation accelerates above 0.40% MoM due to wage pressures and energy price shocks.
• Monetary tightening intensifies, risking a sharp slowdown or recession.
• GBP weakens amid geopolitical tensions, exacerbating imported inflation.

Policy pulse

The Bank of England faces a delicate balancing act. The November print supports a cautious tightening bias but does not yet justify aggressive hikes. Forward guidance will likely emphasize data dependency and inflation risk management.

The UK’s November 2025 core inflation rate of 0.30% MoM signals persistent underlying price pressures amid a complex macroeconomic backdrop. While below estimates, the rise from zero growth last month suggests inflation is not yet contained. Monetary policy is expected to remain vigilant, with moderate rate increases likely to continue. Fiscal policy and external risks add layers of uncertainty, requiring close monitoring. Market reactions indicate tempered confidence but heightened sensitivity to inflation data. Structural trends such as housing costs and supply chain adjustments will remain key inflation drivers in the medium term.

Key Markets Likely to React to Core Inflation Rate MoM

The UK core inflation rate influences several key markets, including currency, bonds, equities, and commodities. Traders and investors closely watch these assets for signals on monetary policy and economic health. The following symbols historically track inflation movements and monetary policy shifts:

• GBPUSD – The British pound vs. US dollar currency pair reacts sensitively to UK inflation data and interest rate expectations.
• FTSE100 – UK equities often respond to inflation-driven monetary policy changes impacting corporate earnings.
• HSBA – HSBC Holdings, a major UK bank, is sensitive to interest rate shifts and economic outlook.
• BTCUSD – Bitcoin’s price can reflect inflation hedging demand amid monetary tightening.
• EURGBP – The euro vs. British pound pair captures relative economic and policy divergences within Europe.

FAQs

What is the significance of the UK Core Inflation Rate MoM?

The UK Core Inflation Rate MoM measures monthly changes in prices excluding food and energy, indicating underlying inflation trends critical for monetary policy decisions.

How does the November 2025 core inflation reading compare historically?

At 0.30%, November’s reading is above the 12-month average of 0.25% but below the 0.40% estimate, signaling moderate inflation pressures after a flat October.

What are the main risks to the UK inflation outlook?

Risks include wage-driven inflation, energy price shocks, fiscal stimulus effects, and external geopolitical tensions impacting supply chains and import costs.

Key takeaway: The UK’s core inflation rate is rising moderately, supporting a cautious Bank of England tightening path amid ongoing economic uncertainties.