The rate of inflation has dropped to 3.2%, easing pressure on prices in a move which would come as a relief to Rachel Reeves. Economists had expected inflation to ease in November after a dip in food costs helped offset a jump in hotel prices.

The Consumer Prices Index (CPI) was 3.2% in the 12 months to November, down from 3.6% in October, according to the Office for National Statistics. ONS Chief Economist Grant Fitzner said: “Inflation fell notably in November to its lowest annual rate since March. Lower food prices, which traditionally rise at this time of the year, were the main driver of the fall with decreases seen particularly for cakes, biscuits and breakfast cereals.”

Mr Fitzner added tobacco prices also helped pull the rate down as prices eased slightly after a large rise a year ago. He added: “The fall in the price of women’s clothing was another downward driver.

“The increase in the cost of goods leaving factories slowed, driven by lower food inflation, while the annual cost of raw materials for businesses continued to rise.”

Mike Randall, Chief Executive at Simply Asset Finance, said lower inflation offered a small seasonal boost for the Chancellor, gently stoked the coals of optimism for businesses and helped move the economy in a more intentional direction.

He added: “But lower inflation alone won’t sustain this trajectory. With the Budget now in the rear-view mirror, one of the Government’s New Year’s resolutions must be a more intentional approach to supporting businesses with access to finance and long-term investment.”

Kris Brewster, director of retail banking at LHV Bank, said: “Let’s hope today’s fall, building on the drop in October, shows the Bank of England finally getting inflation under control.

“Missing the inflation target for well over a year isn’t a technical detail. It’s a real cost felt by hardworking people whose wages still haven’t caught up.”

Mr Brewster said many people are still struggling with day-to-day living costs and although inflation has been on a downward trajectory since the 11% high in October 2022 it is still too far off the pace.

A falling inflation rate doesn’t mean prices are coming down, it means they are going up at a slower rate.

The Chancellor said in a statement: “I know families across Britain who are worried about bills will welcome this fall in inflation.

“Getting bills down is my top priority. That is why I froze rail fares and prescription fees and cut £150 off average energy bills at the Budget this year. The Bank of England agree this will help cut prices and expect inflation to fall faster next year as a result.”

The National Institute of Economic and Social Research said today’s figures suggest inflation is back on a downward path, having fallen in consecutive months for the first time since March.

NIESR added in a statement: “Though still above target, this trajectory means the Bank of England will likely cut Bank Rate tomorrow, but a close decision is expected.”

Analysts had expected the Bank’s next interest rate decision to be on a knife edge, but today’s inflation figure may tip the balance more in favour of a cut as Threadneedle Street continues its attempt to drag inflation down towards its 2% target.

Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, said the latest reading aligns with the BoE’s belief inflation has already peaked.

She added the Bank is widely expected to push ahead with a 25 basis-point cut to Bank Rate after the UK economy showed signs of strain with a 0.1% contraction in October.

Ms Haine said: “With UK unemployment climbing to an almost five-year high of 5.1% in the three months to October, wage growth easing and redundancies rising as the UK’s jobs market faltered ahead of the Budget, the case for a rate cut has strengthened considerably.”