UK inflation has eased to 3.6% in the 12 months to October as expected, the Office for National Statistics reveals.
The latest figure is the lowest in four months and is a 0.2% decrease on September’s figure of 3.8%.
Housing and household services made the largest downward contribution to the monthly change, while food and non-alcoholic beverages made the largest offsetting upward contribution.
On 6 November, the Bank of England decided to hold the base rate at 4% after markets predicted there could be a surprise cut.
At the time of the decision, Bank governor Andrew Bailey said inflation was still too high at 3.8%.
He added: “In our decision to hold interest rates today, we have balanced the risk that above-target inflation becomes more persistent against the risk that demand in the economy is weakening, which might cause inflation to fall too low.
“If inflation stays on track, we expect to be able to gradually cut rates further.”
The next Monetary Policy Committee meeting is on 18 December and will be the last of the year.
Royal London consumer finance specialist Sarah Pennells describes the latest inflation figure as “a welcome gift in the lead up to the festive season” and says its “a step in the right direction as many households are still finding it hard to balance their budgets”.
Pennells comments: “Our research shows that one in ten people (10%) are struggling to pay their household bills, with a further 3% in financial crisis, and only one in four describe themselves as comfortable.”
Meanwhile, Bestinvest by Evelyn Partners personal finance analyst Alice Haine states: “The latest inflation reading aligns with the Bank of England’s forecast that inflation peaked in September, though the figure remains elevated and well above the central bank’s target of 2% – a level not seen in over a year.”
“While softer inflation may give Chancellor Rachel Reeves some breathing space ahead of the Budget, weak economic growth, a struggling jobs market and low consumer confidence continue to pose challenges.”
Elsewhere, Movera chief executive Nick Hale notes: “Inflation dropping to 3.6% is a positive indicator that regardless of what comes from next week’s budget, we could see another base rate cut from the Bank of England this year.”
“Whether Reeves will be able generate growth while tackling rising living costs and paving the way for even more base rate cuts with this budget, only time will tell.”
“What’s really important is that this budget considers the effect a further slowdown in property transactions might have. Implementing a ‘mansion tax’ or increasing Stamp Duty for part of the market, while many prospective buyers are already on pause waiting for better deals, would have a devastating effect on transaction volumes going forward, and the wider property sector.”
“However, introducing another short-term policy – like Stamp Duty relief – could also hit the sector like a thunderbolt from the blue and lead to a sharp surge in purchases.
