UK inflation falls to 3.6% in October
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UK inflation fell to 3.6 per cent in October, strengthening the case for the Bank of England to cut interest rates next month to boost a sluggish economy set to be hit by higher taxes in the Budget.
Wednesday’s figure from the Office for National Statistics was in line with the expectation of economists polled by Reuters and down from September’s 3.8 per cent reading.
The release of the data comes a week ahead of a Budget from chancellor Rachel Reeves that is expected to include steep tax increases, raising further risks to growth.
The BoE’s Monetary Policy Committee held rates at 4 per cent this month in a tight vote but signalled a cut could come as soon as December if price pressures continued to abate.
Services inflation, closely tracked by BoE rate setters as a gauge of underlying price pressures, fell to 4.5 per cent in October, below economists’ forecasts of 4.6 per cent and down from 4.7 per cent in September.
Lee Hardman, a senior currency analyst at MUFG, said: “We think that this report should keep BoE on course to lower rates in December.”
Core inflation, which excludes energy and food, was 3.4 per cent in October, down from 3.5 per cent in September.
In recent months, a divided MPC has had to contend with stubborn inflation and slowing economic growth. The economy grew just 0.1 per cent in the third quarter of the year, the slowest pace since late 2023.
The prospect of the MPC reducing borrowing costs by another quarter point in December will offer some comfort to Reeves as she pledges to bear down on inflation in a bid to pave the way for further interest rate cuts.
Responding to the figures on Wednesday, 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.”
The pound was flat against the dollar at $1.314 following the release of the figures.
