UK inflation falls to 3.6% ahead of budget, offering relief to households, businesses

UK inflation eased to 3.6 per cent in October, according to the latest figures from the Office for National Statistics (ONS), providing a pre-Budget boost to Chancellor Rachel Reeves, as well as relief for consumers and businesses.

The Consumer Prices Index (CPI) fell from September’s 3.8 per cent, marking the first time inflation has reached this level since June. Analysts widely interpret the data as a sign that inflation has peaked across the UK. Earlier this year, in March, CPI had stood at a comparatively low 2.6 per cent. Some economists had anticipated a further dip to 3.5 per cent last month, though the modest shortfall does little to diminish the positive trend, The Independent writes. 

“The anticipated fall was primarily based off last year’s big increase in energy prices dropping out of the annual comparison,” explained RSM UK’s chief economist Thomas Pugh, adding that a continued slowdown in food price inflation also contributed to the decline.

The easing comes just one week before Chancellor Reeves is set to present the Budget, which is expected to include a series of tax increases. On the latest inflation figures, Reeves said: “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. 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.”

However, her approach has faced criticism from opposition figures. Sir Mel Stride, shadow chancellor of the exchequer, 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. If Labour had any backbone, they would adopt our £47 billion savings plan and our Golden Economic Rule next week to ease inflationary pressures.”

ONS data revealed that housing and household services contributed most to the decline in CPI, while food and non-alcoholic beverages pushed the index upward. Health, communication, and transport costs also fell, while education and recreation costs increased.

Economists suggest the disinflation trend, combined with rising joblessness, could pave the way for a Bank of England interest rate cut in December. George Brown, senior economist at Schroders, said:

“Evidence inflation has peaked should tip the scales towards a December rate cut. But any further rate cuts will largely depend on the contents of the Chancellor’s red box.”

Other analysts, including Lindsay James of Quilter and the National Institute of Economic and Social Research (NIESR), caution that the UK economy remains fragile, with subdued growth and a cooling labour market. Meanwhile, consumer finance experts urged households to remain prudent amid the festive season.

Sarah Pennells of Royal London noted that “Black Friday sales can be very tempting, but – no matter how big the discount, it’s not a bargain if you have to take on unaffordable debt to buy it.”

By Sabina Mammadli