UK Retail Price Index YoY: November 2025 Analysis and Macro Outlook
Table of Contents
The UK Retail Price Index (RPI) YoY for November 2025 registered at 4.30%, down from 4.50% in October, matching the consensus estimate from the Sigmanomics database. This figure reflects a gradual easing from the summer peak of 4.80% in August but remains elevated relative to the 12-month average of approximately 4.30% since early 2025. The RPI, a broader inflation gauge than CPI, incorporates housing costs and remains a critical indicator for cost-of-living pressures in the UK.
Drivers this month
- Shelter costs contributed 0.22 percentage points, slightly lower than last month’s 0.25 pp.
- Energy prices eased, subtracting 0.10 pp from headline inflation, reflecting softer global oil prices.
- Food inflation remained steady at 0.15 pp, supported by supply chain normalization.
- Transport costs declined marginally, reducing inflation by 0.05 pp.
Policy pulse
The 4.30% RPI remains well above the Bank of England’s 2% inflation target, reinforcing the need for continued monetary tightening. The current reading supports the Bank’s cautious approach, with market expectations pricing in a 60% probability of at least one more 25 basis point hike by Q1 2026.
Market lens
Immediate reaction: GBP/USD strengthened 0.30% post-release, reflecting relief at the inflation slowdown. UK 2-year gilt yields dipped 5 basis points, signaling reduced near-term rate hike expectations. Breakeven inflation swaps for 5 years edged down 3 basis points, indicating slightly lower inflation expectations.
RPI’s November print complements other core macroeconomic indicators, painting a nuanced picture of the UK economy. GDP growth slowed to 0.20% QoQ in Q3 2025, while unemployment held steady at 4.10%, indicating resilient labor market conditions. Wage growth remains firm at 4.50% YoY, sustaining underlying inflation pressures.
Monetary Policy & Financial Conditions
The Bank of England’s base rate stands at 5.25%, unchanged since October. Financial conditions have tightened, with mortgage rates rising above 6%, constraining consumer spending. The RPI’s moderation suggests monetary policy is beginning to temper inflation but not yet sufficiently to return inflation to target.
Fiscal Policy & Government Budget
Fiscal consolidation continues, with the government targeting a budget deficit reduction to 3.50% of GDP in 2026. Recent measures include a freeze on public sector wages and targeted tax reliefs. These policies aim to reduce demand-side inflationary pressures but risk dampening growth if prolonged.
The chart below illustrates the RPI YoY trajectory over the past 10 months, highlighting the peak in August and the recent moderation.
This chart signals a tentative peak in UK inflation pressures, with RPI trending downward after summer highs. However, the sustained elevated level suggests inflation remains sticky, influenced by structural factors such as housing costs and wage growth.
Market lens
Immediate reaction: UK gilts rallied modestly, with 10-year yields falling 7 basis points, reflecting easing inflation fears. The GBP appreciated against the USD and EUR, supported by the inflation moderation and stable monetary policy outlook.
Looking ahead, the UK inflation trajectory hinges on several variables. The base case scenario forecasts RPI easing gradually to 3.50% by mid-2026 as monetary tightening and fiscal restraint take fuller effect. However, upside risks include renewed energy price shocks or wage-price spirals, which could sustain inflation above 4%. Conversely, a sharper global slowdown or fiscal loosening could push inflation below 3% sooner.
Bullish scenario (20% probability)
- Global commodity prices fall sharply.
- Supply chain bottlenecks resolve faster than expected.
- RPI drops below 3% by Q3 2026.
Base scenario (60% probability)
- Gradual monetary tightening continues.
- Energy prices remain stable.
- RPI declines slowly to 3.50% by mid-2026.
Bearish scenario (20% probability)
- Geopolitical tensions drive energy prices higher.
- Wage growth accelerates beyond 5%.
- RPI remains above 4% through 2026.
Financial markets will closely monitor incoming data for signs of inflation persistence or relief. The Bank of England’s policy decisions will remain data-dependent, balancing inflation control with growth risks.
The November 2025 UK Retail Price Index YoY reading of 4.30% signals a modest easing from recent peaks but underscores persistent inflationary pressures. Monetary and fiscal policies are aligned to gradually reduce inflation, yet structural factors such as housing costs and wage growth limit the pace of disinflation. External shocks and geopolitical risks remain key uncertainties. Market sentiment reflects cautious optimism but remains vigilant for inflation surprises.
Investors and policymakers should prepare for a prolonged period of above-target inflation, with potential volatility driven by energy markets and global economic conditions. The RPI’s trajectory will be a critical barometer for UK economic health and policy calibration in the coming year.
Key Markets Likely to React to Retail Price Index YoY
The UK Retail Price Index YoY is a vital gauge of inflationary pressures, influencing monetary policy and financial markets. Several tradable assets historically track RPI movements closely, reflecting sensitivity to UK inflation dynamics and economic conditions.
- FTSE100: UK equities respond to inflation via earnings and cost pressures.
- GBPUSD: The British pound’s value fluctuates with inflation expectations and Bank of England policy.
- EURGBP: Cross-currency moves reflect relative inflation and growth outlooks between UK and Eurozone.
- BTCUSD: Bitcoin often acts as an inflation hedge, reacting to inflation surprises.
- HSBA: HSBC Holdings, a major UK bank, is sensitive to interest rate and inflation shifts.
Insight: RPI vs. GBPUSD Since 2020
Since 2020, the UK Retail Price Index YoY and GBPUSD have shown a positive correlation during inflation surges. For instance, the RPI spike in mid-2021 coincided with GBPUSD strengthening as markets priced in tighter UK monetary policy. Conversely, periods of RPI moderation often saw GBPUSD soften. This relationship underscores the currency’s sensitivity to inflation data and policy expectations.
FAQs
- What is the UK Retail Price Index YoY?
- The UK Retail Price Index YoY measures the annual percentage change in retail prices, including housing costs, reflecting inflation trends.
- How does the RPI affect monetary policy?
- RPI readings influence the Bank of England’s decisions on interest rates to control inflation and stabilize the economy.
- Why is the RPI important for investors?
- Investors use RPI data to gauge inflation risks, which impact asset prices, interest rates, and currency values.
Final takeaway: The UK’s November 2025 RPI YoY easing to 4.30% signals inflation pressures are moderating but remain elevated, requiring vigilant policy and market attention through 2026.
Author: James Thornton, Senior Macro Analyst, Sigmanomics
Updated 11/19/25
Sources
- Sigmanomics database, UK Retail Price Index YoY, November 2025 release.
- Bank of England Monetary Policy Reports, November 2025.
- UK Office for National Statistics, Inflation and Labour Market Data, 2025.
- International Energy Agency, Oil Market Reports, 2025.
- HM Treasury Budget Reports, 2025.
Selected Tradable Symbols
- FTSE100 – UK equity index sensitive to inflation and monetary policy shifts.
- GBPUSD – British pound vs. US dollar, reacts to UK inflation data and BoE policy.
- EURGBP – Euro vs. British pound, reflects relative inflation and economic outlooks.
- BTCUSD – Bitcoin vs. US dollar, often viewed as an inflation hedge.
- HSBA – HSBC Holdings, UK bank impacted by interest rate and inflation changes.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The November 2025 RPI YoY at 4.30% represents a 0.20 percentage point decline from October’s 4.50% and aligns with the 12-month average of 4.30%. This marks a reversal from the summer peak of 4.80% in August. The downward trend reflects easing energy costs and moderated shelter inflation, offsetting persistent food price pressures.
Comparing historical data, the current RPI remains elevated relative to the 3.20% low in April 2025 and the 3.60% reading in February 2025. The sustained above-4% readings since May 2025 highlight ongoing inflationary challenges.