British inflation slowed last month for the first time since May, official figures showed on Wednesday, providing relief ahead of next week’s annual budget and raising expectations that the Bank of England may ease interest rates in December.
Consumer price inflation fell to 3.6% in October, down from 3.8% in September, according to the Office for National Statistics. The decline matches forecasts from economists and the Bank of England, whose rate-setting committee has closely monitored inflation trends as it weighs future policy decisions.
The slowdown was driven in part by lower household energy bills and cheaper hotel stays, while core consumer prices—which exclude volatile items such as food, energy, alcohol, and tobacco—slipped slightly to 3.4% from 3.5% in September. Services inflation, considered a key gauge of underlying domestic price pressures, also eased to 4.5%, its lowest level since December 2024.
Despite the overall slowdown, food and drink prices continued to rise, with inflation in the sector climbing to 4.9% in October from 4.5% the previous month. Bread, meat, fish, vegetables, chocolate, and confectionery were among items contributing to the increase, while fruit prices fell slightly. The Bank of England has projected food inflation could peak at 5.3% in December, reflecting ongoing pressure on household budgets.
Finance Minister Rachel Reeves said the government is taking steps to address the cost-of-living burden. “Cost of living is still a big burden on families right across the country, and that’s why, in the budget next week, I’ll be taking targeted action to bring down inflation,” she said. Measures are expected to include a mix of tax and spending policies aimed at supporting households without adding further inflationary pressures.
The figures may strengthen expectations of a Bank of England rate cut on December 18. The central bank paused its series of quarterly rate cuts in November, but some economists see conditions improving for a reduction, citing slower inflation and signs of softening economic growth.
Martin Beck, chief economist at WPI Strategy, said the data supports the case for easing: “With inflation now on what should be a sustained downward path, economic growth softening, and next week’s budget likely to deliver a significant fiscal tightening, the conditions are in place for a BoE rate cut in December.”
Some economists, however, caution that high wage growth and underlying price pressures, particularly in the services sector, could temper any move. Factory gate prices rose 3.6% in October, up slightly from September, showing costs remain elevated for businesses.
Sterling fell modestly against the US dollar following the report, while two-year gilt yields declined, reflecting market expectations for a slightly faster pace of interest rate cuts in 2026. The data will be closely scrutinised by policymakers as they prepare the government’s budget and consider the central bank’s next steps.
