London Daily

Focus on the big picture.
Tuesday, Nov 18, 2025

Inflation news is bad - but there is a glimmer of hope

Inflation news is bad - but there is a glimmer of hope

Commodity prices, including copper, oil, and wheat, are all beginning to fall - just one indication that the fundamentals pushing inflation up are finally cooling off.

It will not feel like it, as consumers digest news that UK inflation has hit its highest level since before the Falklands War, but there are reasons to hope that inflation is coming close to its peak.

That is because the price of a number of commodities - whose prices surged after Russian President Vladimir Putin invaded Ukraine - have fallen sharply from their recent peaks.

First and foremost, take the price of oil.

The price of a barrel of Brent crude peaked at $139.13 on 7 March, 11 days after Russian troops entered Ukraine, but today touched $91.51 - a level not seen since before Mr Putin initiated hostilities against his neighbour.

Or have a look at copper, a commodity whose widespread use across a range of industries makes it an accurate barometer of global economic activity, earning it the nickname of 'Dr Copper' on commodity markets.

The price of copper has fallen by more than 25% since it peaked at $10,674 per tonne on 4 March. This morning it was trading at one point at $7,963 - having gone as low as $7,170 last month.

Or take the price of iron ore, the key ingredient in steel, a key cost for sectors like car-making and construction.

It has fallen by around 50% since spiking in March after Putin attacked Ukraine and is now trading at roughly half the price at which it was changing hands this time last year - mainly reflecting weaker demand for steel from the Chinese construction sector.

The same phenomenon has been seen with so-called 'soft' commodities. The price of wheat surged in March immediately after the invasion with the cost of a bushel of wheat (sufficient to produce enough flour to bake 70 1lb loaves of white bread or 90 1lb loaves of wholemeal bread) surging to $13.63 on 8 March.

It was trading today at just $8.03, the level at which it was trading just before the war, despite ongoing concerns about Ukraine's ability to export its wheat.

Not only have commodity prices fallen from their immediate post-invasion peaks - so too have shipping costs, a key contributor to the inflation experienced ultimately by consumers.

The global container freight index compiled by the data provider Freightos, which measures the cost of shipping a typical 40 foot container around the world, has fallen from $9,777 at the beginning of March to $5,956 in the last week.

The fall in shipping costs on certain routes, for example from China to Los Angeles on the US West Coast, is greater still.

All of these factors ought to provide some comfort that the original factors that contributed to the current inflationary pressures being seen in the economy are starting to abate.

That is starting to show up around the world in some measures of inflation, most notably with producer price inflation (a measure of the prices being received by producers of goods and services), which dropped in the United States from 8.4% in June to 7.6% in July.

And there was a sign today that the same is happening here - with input PPI (which reflects the costs being incurred by the producers of goods and services) falling from the record 24.1% seen in June to 22.6% in July.

It raises hopes that output PPI - sometimes referred to as 'factory gate inflation' - will also start to ease in coming months.

That is not to say that the headline rate of inflation in the UK has peaked. It has not, with the peak month likely to come in October, when Ofgem is set to raise the household energy bill price cap.

The Bank of England is predicting a peak of 13%.

The big concern for the Bank is that the nature of inflation is changing.

The current inflation being experienced in the economy is largely due to the war in Ukraine, which has pushed up the price of a range of commodities, as well as ongoing supply chain disruption caused by the recent bout of Covid lockdowns in China.

However, the Bank worries about so-called 'second round effects', changes seen in the behaviour of businesses and households in response to that inflation.

The Bank's Monetary Policy Committee, in raising interest rates earlier this month by the biggest amount since 1995, clearly had this in mind.

Minutes of the meeting suggest the committee had noted indications that inflationary pressures were becoming more persistent and "broadening to more domestically driven sectors".

They went on: "In a tight labour market and an environment in which companies were finding it easier to pass on price increases, a higher and more protracted path for consumer price inflation over the next 18 months could increase the risk that an eventual decline in external price pressures would not be sufficient to restrain expectations of above-target inflation further ahead."

That is why the MPC raised interest rates earlier this month and why the market is now pricing in a further half-point rise next month.

And that may only be the start.

The yield on two-year UK government gilts (IOUs), which is a good indication as to where the market thinks interest rates are heading in the near term, jumped to 2.453% following Wednesday morning's worse than expected inflation figures.

So, while the initial supply pressures that have sparked this year's inflation shock may be easing, the danger is that inflation more broadly may not.

Newsletter

Related Articles

0:00
0:00
Close
UK Unveils Sweeping Asylum Reforms with 20-Year Settlement Wait and Conditional Status
UK Orders Twitter Hacker to Repay £4.1 Million Following 2020 High-Profile Breach
Popeyes UK Eyes Century Mark as Fried-Chicken Chain Accelerates Roll-out
Two-thirds of UK nurses report working while unwell amid staffing crisis
Britain to Reform Human-Rights Laws in Sweeping Asylum Policy Overhaul
Nearly Half of Job Losses Under Labour Government Affect UK Youth
UK Chancellor Reeves Eyes High-Value Home Levy in Budget to Raise Tens of Billions
UK Urges Poland to Choose Swedish Submarines in Multi-Billion € Defence Bid
US Border Czar Tom Homan Declares UK No Longer a ‘Friend’ Amid Intelligence Rift
UK Announces Reversal of Income Tax Hike Plans Ahead of Budget
Starmer Faces Mounting Turmoil as Leaked Briefings Ignite Leadership Plot Rumours
UK Commentator Sami Hamdi Returns Home After US Visa Revocation and Detention
UK Eyes Denmark-Style Asylum Rules in Major Migration Shift
UK Signals Intelligence Freeze Amid US Maritime Drug-Strike Campaign
TikTok Awards UK & Ireland 2025 Celebrates Top Creators Including Max Klymenko as Creator of the Year
UK Growth Nearly Stalls at 0.1% in Q3 as Cyberattack Halts Car Production
Apple Denied Permission to Appeal UK App Store Ruling, Faces Over £1bn Liability
UK Chooses Wylfa for First Small Modular Reactors, Drawing Sharp U.S. Objection
Starmer Faces Growing Labour Backlash as Briefing Sparks Authority Crisis
Reform UK Withdraws from BBC Documentary Amid Legal Storm Over Trump Speech Edit
UK Prime Minister Attempts to Reassert Authority Amid Internal Labour Leadership Drama
UK Upholds Firm Rules on Stablecoins to Shield Financial System
Brussels Divided as UK-EU Reset Stalls Over Budget Access
Prince Harry’s Remembrance Day Essay Expresses Strong Regret at Leaving Britain
UK Unemployment Hits 5% as Wage Growth Slows, Paving Way for Bank of England Rate Cut
Starmer Warns of Resurgent Racism in UK Politics as He Vows Child-Poverty Reforms
UK Grocery Inflation Slows to 4.7% as Supermarkets Launch Pre-Christmas Promotions
UK Government Backs the BBC amid Editing Scandal and Trump Threat of Legal Action
UK Assessment Mis-Estimated Fallout From Palestine Action Ban, Records Reveal
UK Halts Intelligence Sharing with US Amid Lethal Boat-Strike Concerns
King Charles III Leads Britain in Remembrance Sunday Tribute to War Dead
UK Retail Sales Growth Slows as Households Hold Back Ahead of Black Friday and Budget
Shell Pulls Out of Two UK Floating Wind Projects Amid Renewables Retreat
Viagogo Hit With £15 Million Tax Bill After HMRC Transfer-Pricing Inquiry
Jaguar Land Rover Cyberattack Pinches UK GDP, Bank of England Says
UK and Germany Sound Alarm on Russian-Satellite Threat to Critical Infrastructure
Former Prince Andrew Faces U.S. Congressional Request for Testimony Amid Brexit of Royal Title
BBC Director-General Tim Davie and News CEO Deborah Turness Resign Amid Editing Controversy
Tom Cruise Arrives by Helicopter at UK Scientology Fundraiser Amid Local Protests
Prince Andrew and Sarah Ferguson Face Fresh UK Probes Amid Royal Fallout
Mothers Link Teen Suicides to AI Chatbots in Growing Legal Battle
UK Government to Mirror Denmark’s Tough Immigration Framework in Major Policy Shift
UK Government Turns to Denmark-Style Immigration Reforms to Overhaul Border Rules
UK Chancellor Warned Against Cutting Insulation Funding as Budget Looms
UK Tenant Complaints Hit Record Levels as Rental Sector Faces Mounting Pressure
Apple to Pay Google About One Billion Dollars Annually for Gemini AI to Power Next-Generation Siri
UK Signals Major Shift as Nuclear Arms Race Looms
BBC’s « Celebrity Traitors UK » Finale Breaks Records with 11.1 Million Viewers
UK Spy Case Collapse Highlights Implications for UK-Taiwan Strategic Alignment
On the Road to the Oscars? Meghan Markle to Star in a New Film
×