New figures from the Office for National Statistics show that consumer price inflation in the UK eased to 3.6 percent in October, down from 3.8 percent in September. This marks the first decline since May and provides a modest boost for both the government and the Bank of England, which had anticipated a slowdown.

The fall in inflation followed a September reading that came in lower than the Bank’s earlier forecast of around 4 percent. Despite the improvement, sterling slipped slightly against the US dollar following the release of the data.

The Bank of England paused its regular cycle of interest rate reductions earlier this month, reflecting ongoing concerns about inflationary pressures. The Chancellor, Rachel Reeves, has also signalled caution ahead of her budget announcement on 26 November, emphasising her intention to avoid tax or spending decisions that could push inflation higher.

Some analysts believe that previous policy changes, including an increase in the national minimum wage and higher employer-related taxes, may have contributed to upward pressure on inflation over the past year. The UK continues to record the highest inflation rate among major advanced economies.

The Bank’s own projections indicate that inflation is not expected to return to its 2 percent target until the middle of 2027. Wage growth remains a key concern, with current increases exceeding levels that policymakers believe are compatible with stable inflation, particularly given ongoing weaknesses in productivity.

Service sector inflation, a closely monitored indicator due to its sensitivity to labour costs, eased to 4.5 percent in October, down from 4.7 percent in September. This decline was slightly larger than economists had predicted.

Reductions in household energy costs and lower hotel prices were among the main contributors to the fall in inflation last month. Core inflation, which excludes more volatile categories such as food and energy, edged down to 3.4 percent from 3.5 percent.

Food and drink inflation stood at 4.9 percent in October, ahead of an expected peak of 5.3 percent in December.

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