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inflation In October it fell to 3.6 percent compared to earlier.Budget to promote Rachel Reeves – as well as for consumers and businesses.
Latest updates from National Statistical Office (ONS) showed the Consumer Price Index (CPI) inflation That’s a decline from September, when it stood at a surprising 3.8 percent. This has led most analysts to declare that inflation has peaked across the UK.
This is the first time since June this year that the inflation rate has been at this level – although just three months before that, it had hit a low of 2.6 per cent in March.
Some economists were expecting the CPI to fall to 3.5 percent last month, and although that has not happened, the decline in price growth would be a relief to households and firms that have had to deal with persistent price pressures and uncertainty this year.
The expected decline was “primarily based on last year’s large increase energy prices falling out of annual comparisons”, said Thomas Pugh, chief economist at RSM UK, as food price inflation continued to slow down.
This comes just a week before the Chancellor, Rachel ReevesPresents the budget in which it is expected A series of tax increases will be unveiled,
On the falling figures, Ms Reeves said: “This fall in inflation is good news for households and businesses across the country, but I am determined to do even more to bring prices down. That’s why in the Budget next week I will make sensible choices to deliver on the public’s priorities of cutting NHS waiting lists, cutting the national debt and cutting the cost of living.”
Disagreeing, the Shadow Chancellor of the Exchequer, Sir Mel Stride MP, said: “Inflation has been above target every month since Labour’s last budget, leaving working people worse off. Labour’s last budget increased borrowing and taxes, which has driven up inflation and is now hitting families hard. If Labor had any spine, they would have voted next week to reduce inflationary pressures. Adopting our £47 billion savings plan and our Golden Economic Rule.”
Daisy Cooper, deputy leader of the Liberal Democrats, said: “As the cost of living crisis looms, the Chancellor should not take this little gift horse in the mouth. Imposing a secret tax on people in next week’s Budget will prolong the pain of higher taxes and unfairly force poor pensioners and low-income workers to pay tax for the first time.
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“We Liberal Democrats are calling for emergency measures to reduce people’s energy bills, save our high streets with VAT cuts for hospitality, and boost growth in every corner of the UK – funded appropriately by taxing the banks. The Chancellor must put homes and high streets first and prevent the most vulnerable from having to choose between heating and eating out.”
The ONS said that housing and household services “contributed the largest decline” to the changing rate of CPI; While food and non-alcoholic beverages made the largest offsetting upward contribution.
The costs of health, communications and transportation also declined, reducing the inflation rate, while the costs of education and entertainment and culture increased.
Persistent deflation – as well as recent data about rising unemployment – could mean the Bank of England will cut interest rates in December.
Schroders senior economist George Brown said the situation beyond this remains unclear and will largely depend on Rachel Reeves’ budget. He said, “The evidence is inflation has peaked, which should lead to a rate cut in December. But further rate cuts will largely depend on the contents of the Chancellor’s red box. If VAT and the green levy were removed from household energy bills, inflation could fall by as much as half a percentage point.”
“But we are concerned that broader price pressures will remain persistent. Wage growth is still well above the target-consistent pace, especially given repeatedly weak productivity.”
Quilter strategist Lindsay James said risks to the broader economy remain. “Although travel trends are improving, the macroeconomic backdrop remains fragile. Growth has been slow throughout the year, and the labor market is now cooling at a rapid pace. As we approach 2026, the economy is clearly at a point of significant risk.”
“Amidst rising unemployment, ill-conceived plans to target the offer of tax relief from salary sacrifice pensions not only pose huge problems for the future, but also make workers even more expensive for companies already hit hard by rises in National Insurance and the minimum wage.”
The National Institute of Economic and Social Research (NIESR) also said it expected two more rate cuts from the Bank of England next year, after inflation “has reached its peak”. “In contrast to announcements in the autumn 2024 budget, where rising business costs may have contributed to price rises in 2025, we think inflation is less likely to rise in the upcoming budget,” the NIESR said in a statement.
“The fall in inflation is welcome news and provides some relief for families over the winter months,” said Kevin Mountford, co-founder of Raisin UK. “Although borrowing costs remain high, stabilizing price pressures could pave the way for lower interest rates in the future, which could make mortgages and loans more affordable over time.”
Consumers were reminded that falling inflation, although a positive thing, will be of no help if they overextend themselves in the coming period – especially with borrowing rates still high.
“No matter how healthy your finances are, Christmas is an expensive time, so, although it’s good news that inflation is falling, many families will be spending more on festive gifts, food and going out in the coming weeks. Black Friday sales can be very tempting, but – no matter how big the discount, if you have to take out unaffordable debt to buy it, it’s no deal,” said Sarah Pennells, consumer finance expert at Royal London.
People with cash in their accounts earning interest below the rate of inflation were urged to move it Wealth Head of Elsewhere by Derek Sprawling Wealth In spring.
“The decline in inflation provides some relief, but I urge savers not to get complacent. Even with lower rates, billions of people remain in accounts with payments below inflation, which remain relatively high. Savers should take the opportunity to review their savings options and switch to accounts that deliver returns above inflation, ensuring their money continues to grow in real terms,” he explained.
“Also, with the Budget approaching, the outlook for interest rates is volatile regardless of the inflation rate. Moving your rainy day savings to an account that gives better returns without restricting access offers better returns now and flexibility in the future.”
“There remains a significant gap between the best and worst rates available, so it is important to ensure you are regularly reviewing your interest rate and switching where possible,” said Sally Conway of Shawbrook Bank.