Inflation eases to a four month low
UK inflation continued its gradual slowdown in October, with the annual consumer prices index falling to 3.6 percent from 3.8 percent a month earlier. The Office for National Statistics said the reading marked the lowest level since June, though it came in slightly above the 3.5 percent forecast by most economists. Lower domestic energy bills drove the decline, while a rebound in food prices provided a partial offset.
Despite remaining above the Bank of England’s two percent target, the latest figures reinforce expectations that policymakers may deliver another quarter point rate cut at the December 18 meeting. Analysts noted that a softer labor market and stagnant economic growth are increasing pressure on the bank to ease borrowing costs again.
Budget timing adds complexity for policymakers
The inflation release lands just one week before Treasury chief Rachel Reeves unveils her long awaited budget, which is widely expected to include tax increases aimed at narrowing a multibillion pound gap in the public finances. Following the data, Reeves said she planned to take “targeted action” to help ease the cost of living, signaling that support measures may play a prominent role in the budget.
Economists say the budget will be the final factor the Monetary Policy Committee wants to assess before approving another reduction. Suren Thiru, economics director at ICAEW, said that while conditions for a December cut are “falling into place,” policymakers will want to gauge the impact of upcoming fiscal measures first.
Bank of England weighs its next move
The Bank of England kept its benchmark interest rate at four percent earlier this month, with a narrow majority of members opting to wait for more clarity on inflation trends. While the slowdown has been steady, officials have stressed the need for additional data to confirm that price pressures are falling convincingly back toward target.
Markets remain focused on signals from both the budget and upcoming economic releases. Analysts expect the central bank to remain cautious, but note that weakening demand, slower wage growth and subdued economic momentum are increasingly strengthening the case for further easing.
