The rate of inflation fell far more quickly than expected last month, paving the way for another cut in interest rates tomorrow.
Prices rose by 3.2% in the month, down from 3.6% in October and better than the modest fall forecast by City economists.
The FTSE 100 index rallied by a better-than-expected 1% following the release of the figures.
Serco upgrades 2025 guidance, shares rally 5%
08:56 , Graeme Evans
Serco shares have rallied 5% or 13.5p to 265.7p after the outsourcing group bolstered operating profit guidance for 2025 by £10 million to £270 million.
It forecast further improvement to about £300 million in 2026, reflecting expectations for £5 billion of revenues and organic sales growth of 3%.
FTSE 250-listed Serco employs more than 50,000 people across defence, space, migration, justice, healthcare, mobility and customer services.
The company reported £5.5 billion of contract awards in 2025, with around two-thirds being in the defence sector.
Chief executive Anthony Kirby said: “The global government services market is substantial, with high barriers to entry and strong growth prospects, particularly in the defence sector.
“Our significant order intake, of which around two thirds is in defence, and record pipeline further demonstrate the structural drivers of demand for our services, as governments face ever more complex challenges, and look to partners such as Serco to support them.”
Builders and banks lift FTSE 100, Bunzl down 6%
08:25 , Graeme Evans
Inflation’s fall to 3.2% today boosted the FTSE 100 index, with London’s top flight up by a bigger-than-expected 0.9% or 90.25 points at 9775.04.
Housebuilder Persimmon rose 2% or 25p to 1330.5p as the ONS figures improved the outlook for mortgage affordability, including through a rate cut tomorrow.
Emma Wall, Hargreaves Lansdown chief investment strategist, said: “Lower interest rates are good news for any corporate with leverage, and has the potential to boost domestic consumption too, which in turn could support corporate revenues.”
BP and Shell added 2% as the price of Brent Crude rallied back towards the $60 threshold.
Other risers included banking groups HSBC and Barclays, with their shares up 24.2p to 1136p and 7p to 457.5p respectively.
A record silver price gave a further lift to Mexican miner Fresnillo, which rose 68p to 2992p.
On the fallers board, workplace products supplier Bunzl fell 6% or 124p to 2096p after it forecast a slightly weaker operating margin in 2026.
In the FTSE 250, outsourcing group Serco rose 4% or 10.5p to 262.7p after lifting operating profit guidance for this year to £270 million.
Grangemouth chemicals plant secures Government support
07:57 , Graeme Evans
Britain’s biggest chemical plant is to remain open after owner Ineos secured a major Government support package, in a deal which will secure around 500 jobs.
The Government and Ineos will together invest around £150 million into the Grangemouth petrochemicals site, which the UK has deemed “strategically important” for its national infrastructure.
Ineos has given assurances that funding will only be used to improve the site and allowed the Government a share in future profits.
FTSE 100 rallies after inflation boost
07:46 , Graeme Evans
Sterling has fallen 0.7% against the US dollar after surprise inflation figures boosted the chances of an interest rate cut by the Bank of England tomorrow.
The decline to $1.3325 was accompanied by a spike in FTSE 100 futures trading, with London’s top flight now set to open about 70 points higher.
Inflation is still well above the Bank 2% target rate but today’s bigger than expected fall will be welcome news for the Chancellor after a run of gloomy economic figures.
Bank set to cut rates as inflation fall continues
07:38 , Graeme Evans
Capital Economics said today’s surprise fall to 3.2% is the third consecutive softer-than-expected inflation outturn, showing that disinflation is happening faster than expected.
The consultancy expects December’s inflation reading to nudge up slightly before a fall from around 3% in March to 2% in April, when comparisons with the previous year’s bill increases will be crucial.
It said today’s figures “will surely be enough” to prompt the Bank to cut interest rates from 4% to 3.75% tomorrow.
Wealth Club investment manager Isaac Stell added: “With challenging economic conditions in the form of declining GDP and an unemployment rate nearing a five- year high, it is hoped a perfectly wrapped rate cut tomorrow will deliver some festive cheer to the UK economy.”
Inflation rate falls more than expected
07:19 , Graeme Evans
The UK’s annual rate of Inflation today fell by more than expected to 3.2%, its lowest level since March.
November’s decline from 3.6% compares with City forecasts for a figure of 3.5%, further boosting hopes for an interest cut by the Bank of England when its policy meeting concludes tomorrow.
Food and non-alcoholic beverages prices rose by 4.2% in the year to November, down from 4.9%. On a monthly basis, food and non-alcoholic beverages prices fell by 0.2% in November compared with a rise of 0.5% a year ago.
Grant Fitzner, ONS chief economist, said: “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.
“Tobacco prices also helped pull the rate down, with prices easing slightly this month after a large rise a year ago. 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.”
FTSE 100 seen higher, oil price recovers ground
07:00 , Graeme Evans
The FTSE 100 index is seen recouping some of yesterday’s losses, with IG futures pointing to a rise of about 0.2%.
The improvement follows a mixed Wall Street session after the Dow Jones Industrial Average fell 0.6% but the Nasdaq Composite rose 0.2%.
The price of Brent Crude is 1.2% higher at $59.64 a barrel, having fallen below $60 in yesterday’s session.
Shell and BP shares were the biggest factor in last night’s negative performance in London as the FTSE 100 index closed down 0.7% or 66.52 points at 9684.79.
Asia markets are in positive territory, with the Hang Seng index up by 0.8%.
This article was written by Graeme Evans from The Evening Standard and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to@industrydive.com.