UK inflation falls to four-month low after energy price hikes ease

UK inflation has fallen to the lowest level since June after gas and electricity price rises eased, providing a pre-Budget boost to the Government and some relief to households, new official figures showed.

The rate of Consumer Prices Index (CPI) inflation fell to 3.6% in October, from 3.8% in September, the Office for National Statistics (ONS) said.

This marks the lowest CPI rate since June this year, but above the 3.5% that most economists were forecasting for the month.

A slower increase in gas and electricity prices was the biggest factor putting downward pressure on the overall inflation rate in October, the ONS said.

Ofgem raised the energy price cap by 2% in October, but this is significantly less than the 9.6% hike last year.

Hotel prices also dropped on a monthly basis after accelerating during the summer months.

However, food prices rose sharply again in October after easing back the previous month.

The annual rate of food and non-alcoholic drink inflation rose to 4.9%, from 4.5% in September, while prices increased by 0.5% month on month.

This was driven largely by an increase in the price of bread and cereals, while meat, fish, vegetables, sugar and chocolate also rose, partly offset by a decline in fruit prices.

The latest inflation reading comes a week before the Chancellor is due to deliver her autumn Budget, where she is widely expected to raise taxes to fill a multibillion-pound gap in her spending plans.

October’s decline in CPI will be positive news for the Government after more disappointing datasets in recent weeks showed UK economic growth was lower than forecast in the third quarter and unemployment hit the highest rate since 2021.

Rachel Reeves said she was planning to make “fair choices” at the upcoming Budget to help further cut the cost of living.

“This fall in inflation is good news for households and businesses across the country, but I’m determined to do more to bring prices down,” she said.

“That’s why at the Budget next week I will take the fair choices to deliver on the public’s priorities to cut NHS waiting lists, cut national debt and cut the cost of living.”

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

“The costs of hotels was also a downward driver, with prices falling this month.

“These were only partially offset by rising food prices, following the dip seen in September.”

The Tories blamed the Labour Government for “stoking inflation” following its last tax-rising budget in the spring.

Shadow chancellor Sir Mel Stride said: “Inflation has been above target every single month since Labour’s last budget, leaving working people worse off.

“Labour’s last budget hiked borrowing and taxes, stoking the inflation now hitting families.”

Nevertheless, experts said the latest inflation data paves the way for the Bank of England to cut interest rates in December.

Rob Wood and Elliott Jordan-Doak, UK economists for Pantheon Macroeconomics, said the inflation figure “leaves a rate cut next month nailed-on”.

“Granted, headline inflation slowed a little less than the MPC (monetary policy committee) and consensus expected,” they said, adding that “food prices were to blame”.

“Looking ahead, inflation has passed its peak, but we will have to wait until January for another decisive step down,” they added.

The ONS’s preferred measure of inflation, Consumer Prices Index including occupiers’ housing (CPIH), fell to 3.8% in October, from 4.1% in September.

Meanwhile, the Retail Prices Index (RPI) rate of inflation slowed to 4.3% from 4.5% in September.