In a welcome development for the British economy, the UK's inflation rate is predicted to have fallen in October, offering a potential respite for households and the government.
A Forecasted Decline
According to economists in the City of London, the annual inflation rate, measured by the Consumer Price Index (CPI), is forecast to have cooled to 3.6% in October. This marks a decrease from the 3.8% recorded in September. If these predictions hold true when the official figures are released, it will be the first time in five months that the annual inflation rate has shown a decline.
This anticipated drop is seen as a positive sign for Chancellor Rachel Reeves, providing a more favourable backdrop for her crucial autumn tax and spending statement, scheduled for 26 November. A lower inflation reading signals some easing of the financial pressure on hard-pressed consumers, aligning with the government's vow to tackle the high cost of living.
Expert Analysis and Broader Context
Grant Slade, UK economist at Morningstar, who is expecting the slowdown to 3.6%, commented on the trend. He stated that after inflation reared its head again in 2025, it likely peaked in September. Slade believes the disinflation process remains intact, supported by a weakening labour market and stable long-term inflation expectations, which should allow the impact of previous supply-side shocks to fade in the coming quarters.
However, the news is not entirely positive. Even with this decline, inflation remains well above the government's 2% target. This would mark the 13th consecutive month that the CPI has surpassed the official goal. Furthermore, the International Monetary Fund forecast last month that UK households would experience the highest inflation rate in the G7 group of advanced economies both this year and next.
Implications for Interest Rates and the Economic Agenda
The dip in inflation also raises hopes for further monetary policy easing. It could pave the way for another interest rate cut from the Bank of England, which would be welcomed by borrowers and businesses alike.
The official inflation data for October is set for release at 7am GMT. This key statistic is part of a busy economic agenda for the day, which also includes ONS house price and rents data at 9.30am, final Eurozone inflation figures at 10am, US housing starts at 1.30pm, and the publication of the US Federal Reserve's meeting minutes at 7pm.
