UK inflation eases for first time in five months to 3.6% before crunch budget | Inflation

Inflation in the UK fell to 3.6 percent in October; This has eased pressure on households and provided support for Rachel Reeves as she prepares for the chancellor’s make-or-break budget next week.

Office for National Statistics (ONS) said annual inflation, as measured by the consumer price index, cooled for the first time in five months, falling from a peak of 3.8 per cent in July, August and September.

ONS chief economist Grant Fitzner said: “Inflation eased in October, driven mainly by gas and electricity prices, which rose less than last year following changes to the Ofgem energy price cap.

“Hotel prices also fell this month due to falling prices. These were only partially offset by rising food prices following the decline seen in September.”

Last month’s decline matched City economists’ estimates but was still well above the government’s 2% target.

In his highly anticipated tax and spending announcement on November 26, Reeves promised to reduce living costs, including measures to reduce the rate of inflation, to ease the path for the Bank of England to cut interest rates.

The Chancellor said: “This fall in inflation is good news for households and businesses across the country, but I am determined to do more to bring prices down.

“That’s why I’ll be holding fair elections next week in the budget to deliver on the public’s priorities of shortening NHS waiting lists, reducing the national debt and lowering the cost of living.”

On Tuesday evening, he said he had asked Britain’s competition watchdog to examine the rising costs of private dental treatment, amid growing concerns about rising prices.

The Bank of England opened the door to post-budget cuts to borrowing costs in December earlier this month after signaling inflation had likely peaked at a time when fears were growing about the strength of the economy.

Core inflation, which excludes food and energy and is closely followed by the Bank, which strengthens the possibility of a rate cut starting next month, decreased to 3.4% from 3.5% in September.

Borrowing costs have fallen fivefold since Labor came to power in July 2024, with the last decline in August.

But the UK continues to face the highest inflation rate in the G7, with households particularly under pressure from rapidly rising food prices. Shadow chancellor Mel Stride said: “Inflation has been above target every month since Labour’s last budget, leaving working people worse off.”

The annual inflation rate for food and non-alcoholic beverages rose to 4.9% in October from 4.5% in September, driven mainly by increases in bread and cereal prices, highlighting the pressure on families.

Increases in meat, fish and vegetable prices, as well as sugar, jam, honey, syrup and chocolate, were partially offset by a moderate decline in fruit prices.

Economists said it was possible for the headline inflation rate to rebound in November. However, rising unemployment and slowing wage growth are expected to encourage the Bank to cut interest rates, depending on the outcome of the Chancellor’s budget.

Suren Thiru, director of economics at the Institute of Chartered Accountants in England and Wales, said: “Although conditions are in place for a rate cut in December, the budget is a final hurdle as rate setters will want to gauge the impact of announced policies before allowing a new rate cut.”