Inflation eases to 3.6% after being persistently higher for the last 3 months. This is good news from the Office for National Statistics (ONS), which released the latest inflation rate figures today. The drop from the previous rate of 3.8% is a week ahead of the Autumn Budget, when it’s hoped that further measures will be taken to reduce the pressure on households and businesses.
What has caused the drop in inflation?
Gas and electricity prices were the main factors behind the fall in inflation. After changes in the Ofgem energy price cap, these prices experienced a slower increase than they did this time last year. The energy price cap was raised by 2% in October but this was significantly lower than the 9.6% increase last year. Hotel prices have also fallen this month, having risen during the summer months.
These drops were partially offset by food prices, which have risen in the year to October after easing in the year to September. From one month to the next, food and non-alcoholic beverages increased to 4.9% from 4.5%. In particular, the costs of bread, potatoes, cereals, sugar and fish have risen. The annual cost of raw materials has also increased again for businesses.
Inflation eases ahead of the Autumn Budget
The Autumn Budget is to be announced on 26th November. Chancellor Rachel Reeves has welcomed the latest inflation rate news and has confirmed that she intends to do more to bring about a fall in prices. The next question is whether an interest rate cut is on the cards for December. The base rate currently stands at 4% with the next review by the Monetary Policy Committee to take place on 18th December.
Although inflation has lowered to 3.6%, economists had predicted a rate of 3.5% so it has still come in slightly higher than previously anticipated. It also remains well above the Bank of England’s 2% target. The lower inflation rate has increased the likelihood of a possible interest rate cut in December. However, speculation by economists remains reserved until the details of the Autumn Budget are known.
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