UK inflation falls to 3.6%, lowest in four months

The UK’s inflation rate has fallen to 3.6% in October for the year, its lowest level in four months. The Office for National Statistics (ONS) says prices are now rising more slowly than they did earlier in the year. This is a slight drop from September’s rate of 3.8%, although economists expected a fall to 3.5%.

The slowdown in inflation was mainly caused by smaller increases in household energy and hotel prices. Gas and electricity costs did rise, but not as sharply as they did last year. This was due to changes in the Ofgem energy price cap, which limited how much suppliers could charge. Hotel prices also dropped more than usual as the busy summer season came to an end.

But while some costs have eased, food prices continue to put pressure on many families. Food and non-alcoholic drink inflation increased to 4.9% in October, up from 4.5% in September. Everyday items such as bread, meat, fish, vegetables, chocolate and sweets became more expensive. The only slight relief was a small drop in fruit prices. According to the Food and Drink Federation, the rise in food costs is mainly due to higher prices for ingredients, increased energy bills and extra charges linked to packaging taxes and National Insurance.

Chancellor Rachel Reeves responded to the new figures by promising to continue working to bring inflation down. She acknowledged that the cost of living remains a serious concern for households across the country. The government is preparing for its upcoming Budget, which is expected to include a mix of tax increases and spending cuts to help strengthen public finances. Reeves said reducing the cost of living will be one of her key priorities in the Budget.

The drop in inflation has raised hopes that interest rates could fall soon. The Bank of England kept interest rates at 4% during its latest meeting. If inflation continues to slow, borrowing costs may decrease, which would bring relief to mortgage holders and businesses. Chief UK economist at Pantheon Macroeconomics, Rob Wood, said he believes a rate cut in December is very likely. However, he expects that the Bank will wait longer before making another cut.

The Bank of England will also monitor core inflation closely. Core inflation removes the impact of food and energy prices, which can jump around quickly. Both core and services inflation fell in October, giving hope that overall inflation may now be moving steadily downward.

Even with the recent improvements, there are still factors that could affect inflation in the months ahead. Global events continue to influence energy prices, while climate-related effects can impact the cost of commodities like food. Decisions that the government makes in the upcoming Budget could also influence inflation. Some experts believe that the chancellor may reduce taxes on energy bills, while others expect more spending cuts or new taxes. Opposition parties reacted strongly to the new inflation data. Shadow Chancellor Sir Mel Stride said inflation has been above the Bank of England’s 2% target for too long, leaving families worse off. Liberal Democrat deputy leader Daisy Cooper called on the government to take urgent action by cutting energy bills and reducing VAT for the hospitality sector.