The UK economy is once again grappling with inflation, which reached an eight-month high in November. Despite efforts to curb it, inflation seems to keep prevailing. Data showed that UK consumer prices rose by 2.6% year-on-year in November, up from 2.3% in October. This marks the highest inflation rate since March, signaling a persistent upward trend in consumer price growth, which in turn is weighing on the UK economy.

While price increases for services remain stable, this has provided some relief to the Bank of England, which closely monitors this indicator as a gauge of core inflationary pressures. According to the UK's Office for National Statistics, services inflation held steady at 5.0% in November, moving further away from September's 1.7%. This was the first time that inflation had fallen below the BoE’s 2% target in three and a half years, during which time it peaked at 11%.

This shifting inflationary environment has led market participants to anticipate a potential interest rate cut by the Bank of England next year, which coincides with a weaker pound sterling. Amid mixed economic reports, investors expect the regulator to keep its base rate at 4.75%. At the same time, a scenario in which the central bank continues to gradually ease monetary policy based on incoming data cannot be ruled out.