UK (Parliament Politics Magazine) – UK inflation fell to 3.6% in October, easing pressure on households and offering a pre-Budget boost, driven mainly by lower housing and energy costs.
As reported by The Guardian, UK inflation dropped to 3.6% in October, offering relief to families and giving the Chancellor Rachel Reeves fresh momentum ahead of next week’s crucial Budget announcement.
What did the ONS data show about the UK’s inflation drop in the months?
The Office for National Statistics data show annual consumer price inflation fell for the first time in five months, dropping from a three-month high of 3.8% over July, August, and September. This marks the first time inflation has climbed this high since June, after hitting a low of 2.6% in March.
The ONS said housing and household services were the major factors contributing to the fall in CPI, whereas food and non-alcoholic beverages pushed it upward.
Declines in health, transport, and communication costs helped reduce inflation, even as education and recreation expenses pushed it higher.
Slowing inflation and rising unemployment point to a likely Bank of England interest rate cut in December.
Official data shows food inflation rising from 4.5% to 4.9%, with supermarkets, among the country’s largest employers, reflecting the increase in prices.
Weak cocoa and coffee harvests have pushed chocolate prices to record highs this summer, while energy costs, including bills, have remained stable thanks to strong global gas supplies.
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.”
He added,
“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 annual cost of raw materials for businesses continued to increase, while factory gate prices also rose.”
How did Rachel Reeves respond to the latest ONS inflation figures?
Chancellor Rachel Reeves will praise the latest inflation data ahead of her budget, highlighting tangible price changes for consumers.
Reacting to the inflation figures, she 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.”
Ms Reeves added,
“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.”
The chancellor has pledged to tackle living costs in the upcoming Budget, with measures to lower expenses and inflation, supporting potential interest rate cuts by the Bank of England.
Since Labour took office in July 2024, borrowing costs have been cut five times, most recently in August, but households still face the highest inflation in the G7, particularly in food.
Analysts warned that headline inflation could rise again in November, but weak wage growth and rising unemployment could lead the Bank of England to cut interest rates after the chancellor’s Budget.
What did Tories say about Labour’s inflation record?
Commenting on the official inflation data, Shadow Chancellor Sir Mel Stride MP 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.”
What did the Liberal Democrats say about the latest inflation figures?
Liberal Democrats deputy leader, Daisy Cooper, said,
“As the cost-of-living crisis rages on, the Chancellor mustn’t look this small gift horse in the mouth. Hitting people with a stealth tax at next week’s Budget would prolong the pain of higher taxes for much longer and unfairly pull poorer pensioners and low-income workers into paying tax for the first time.”
She added,
“We Liberal Democrats are calling for emergency measures to slash people’s energy bills, save our high streets with a VAT cut for hospitality and boost growth in every corner of the UK – funded fairly by taxing the banks. The Chancellor must put households and high streets first and put an end to the most vulnerable from having to choose between heating and eating.”
How did economists react to falling inflation and the upcoming Budget?
George Brown, senior economist at Schroders, said the outlook remains uncertain and will depend largely on the details of Rachel Reeves’ Budget.
He stated,
“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. If VAT and green levies are eliminated from household energy bills, inflation could fall by as much as half a percentage point.”
Mr Brown added,
“But we remain concerned that broader price pressures will prove persistent. Wage growth is still well above a target-consistent pace, especially given repeatedly weak productivity.”
Lindsay James, strategist at Quilter, warned that broader economic risks continue to persist.
She said,
“Although the direction of travel is improving, the wider economic backdrop remains fragile. Growth has been subdued all year, and the labour market is now cooling at a faster pace. The economy is clearly at a point of significant risk as we move towards 2026.”
Ms James added,
“Amidst rising unemployment , ill thought-out plans to target the tax relief on offer from salary sacrifice pensions not only store up greater problems for the future but also make workers even more expensive for companies who have already been hit hard by hikes to National Insurance and the minimum wage.”
Raisin UK’s co-founder, Kevin Mountford, said,
“Falling inflation is welcome news and provides some relief for households heading into the winter months.”
He added,
“While borrowing costs remain high, stabilising price pressures may pave the way for lower interest rates in the future, which could make mortgages and loans more affordable over time.”
Sarah Pennells, consumer finance specialist at Royal London, said,
“No matter how healthy your finances, Christmas is an expensive time, so, while it’s good news that inflation is falling, many households will be spending more in the coming weeks on festive gifts, food and going out. The 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.”
Derek Sprawling, head of money at Spring, advised savers with accounts yielding below inflation to seek better returns elsewhere.
He said,
“A fall in inflation offers some relief, but I urge savers not to become complacent. Even with a lower rate, billions remain in accounts paying below inflation, which remains relatively high. Savers should take this opportunity to review their savings options and switch to accounts that deliver returns above inflation, ensuring their money continues to grow in real terms.”
Mr Sparwling stated,
“Furthermore, with the Budget due, the outlook for interest rates is volatile regardless of the inflation rate. Moving your rainy-day savings to an account that gives a better return without restricting access provides better returns now and flexibility in the future.”
Suren Thiru, the economics director at the Institute of Chartered Accountants in England and Wales, said,
“Though the conditions for a December interest rate cut are falling into place, the budget is a last obstacle as rate-setters will want to gauge the effect of the policies announced before authorising another rate reduction.”
Which tax changes are expected in the UK’s 2025 autumn Budget?
Chancellor Rachel Reeves will deliver the UK’s 2025 Autumn Budget on Wednesday, 26 November 2025.
The expected tax changes in the Budget are:
- Freeze on Income Tax and NI thresholds; cap on tax-free pension “salary sacrifice” contributions.
- New tax on high-value homes; NI on rental income; potential CGT and IHT changes.
- Tax on electric vehicles; review of the two-child benefit cap.
- Paid placements through a youth employment guarantee scheme.
