DAVY VIEW

Annual UK inflation fell well below consensus expectations in November, reaching 3.2% compared to a 3.5% consensus figure. The declines were quite broadly based, and core inflation also undershot expectations. Last month, the Bank of England (BoE) noted concerns that there could be a material undershoot to inflation owing to a weak backdrop for the labour market and economy-wide demand; we expect four more cuts to Bank Rate next year.