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UK inflation slows to 3.6% in October, yet food costs resume upward trend
The UK's annual inflation rate declined to 3.6% in October, down from 3.8% in September, marking the slowest price growth in four months, according to the Office for National Statistics (ONS). Despite the overall easing-driven by lower household energy and hotel costs-food prices reversed their September dip, rising by 4.9% year-over-year, up from 4.5% the prior month.
Energy and hospitality sectors ease pressure
The drop in headline inflation was primarily attributed to smaller increases in gas and electricity prices, following adjustments to Ofgem's energy price cap. While regulated household energy costs rose by 2% in October, this was significantly below the 9.6% hike seen a year earlier. Additionally, hotel rates fell more sharply than usual after the summer peak, contributing to the downward trend.
However, the ONS noted that fuel prices continued to climb, impacting both drivers and delivery costs. Businesses also faced higher expenses, with raw material and factory-gate prices rising further.
Food inflation rebounds amid broader cost pressures
Food and non-alcoholic beverages emerged as the largest upward pressure on inflation, with prices for staples like bread, meat, fish, vegetables, and confectionery all rising. The Food and Drink Federation cited persistent challenges, including elevated ingredient and energy costs, alongside regulatory burdens such as packaging taxes and increased National Insurance contributions. Fruit prices, however, saw a slight decline.
Bank of England's rate decision looms as inflation remains above target
While inflation has retreated from its recent plateau, it remains above the Bank of England's 2% target. The central bank's Monetary Policy Committee, set to meet on 18 December, will weigh the latest data against longer-term price risks. Economists at Pantheon Macroeconomics now anticipate a December interest rate cut as likely, though they caution against expecting rapid further reductions.
Core inflation, which excludes volatile food and energy prices, also eased in October-a sign that underlying price pressures may be cooling. The Bank had previously suggested inflation peaked in September, albeit below its earlier 4% forecast.
"Inflation eased in October, driven mainly by gas and electricity prices, which increased less than this time last year."
Grant Fitzner, ONS chief economist
Chancellor Reeves signals Budget focus on cost-of-living relief
The inflation report arrives a week before the government's Autumn Budget, where Chancellor Rachel Reeves has pledged to prioritize easing cost-of-living pressures. Reeves acknowledged that inflation and high prices continue to strain households, stating:
"I'm determined to do more to bring prices down. I recognise that inflation and the cost of living is still a big burden on families across the country."
Rachel Reeves, Chancellor of the Exchequer
Analysts speculate the Budget may include measures such as tax cuts on energy bills or sector-specific relief, like a VAT reduction for hospitality. However, planned tax rises and spending cuts could also exert a deflationary effect, complicating the economic outlook.
Political reactions highlight ongoing economic strains
Opposition figures seized on the data to critique the government's record. Shadow Chancellor Sir Mel Stride noted that inflation has exceeded the Bank of England's target every month since the last Labour Budget, leaving workers worse off. Meanwhile, Liberal Democrat deputy leader Daisy Cooper urged Reeves to capitalize on the "small gift" of lower inflation with emergency measures, including energy bill reductions and hospitality sector support.
Outlook remains uncertain amid global and domestic factors
The trajectory of inflation will depend on multiple variables, including global energy and commodity prices, climate-related disruptions, and domestic policy choices. While the latest figures offer cautious optimism, economists warn that "sticky" inflation-particularly in services-could delay sustained relief for consumers and businesses alike.
