The data comes just a week before Chancellor Rachel Reeves is set to deliver her highly anticipated autumn Budget, where she is expected to introduce measures aimed at addressing the cost-of-living crisis. Though the dip in inflation provides some breathing space, experts warn that more substantial changes will be needed to tackle persistent pressures, particularly on food and housing.
Easing Energy Prices Drive Inflation Down
The key factor contributing to the decline in inflation was a slowdown in gas and electricity price increases. The energy price cap set by Ofgem rose by just 2% in October, a significant reduction compared to the 9.6% hike the previous year. This easing of energy costs provided the most significant downward pressure on overall inflation, according to the ONS.
However, while energy prices have become more stable, other areas of household expenditure remain under strain. Food prices, in particular, have continued to climb. The annual rate of inflation for food and non-alcoholic drinks increased to 4.9% in October, up from 4.5% the previous month. The rising cost of staples such as bread, cereals, meat, and vegetables has kept pressure on families, particularly in the context of rising grocery bills.
This mixed picture suggests that while energy prices are stabilising, the broader cost-of-living crisis persists. As a result, Chancellor Reeves is under increasing pressure to implement measures that will provide further relief to consumers when she unveils the government’s tax and spending plans next week.
The Political and Economic Implications for the Government
The drop in inflation comes at a crucial time for the government, offering Chancellor Rachel Reeves a moment of optimism before her Budget speech on 26 November. The decline could bolster her position as she seeks to navigate the delicate balance of supporting households while addressing the UK’s growing fiscal challenges.
Experts have pointed out that the slower rise in inflation could pave the way for the Bank of England to cut interest rates as early as December. Rob Wood and Elliott Jordan-Doak, UK economists at Pantheon Macroeconomics, have noted that the path is now “almost clear” for a rate cut, although they stress that food prices remain a significant concern. High inflation in areas like housing, services, and food could make a rapid rate reduction difficult, despite the easing of energy costs.
Chancellor Reeves has stated that her Budget will focus on “fair choices” aimed at reducing the cost of living, cutting NHS waiting lists, and tackling national debt. While these measures may offer some relief to households, the government is expected to face significant challenges in addressing inflation in the long term. According to Rebecca Florisson, principal analyst at the Work Foundation, the government must focus on supporting lower-income workers who are still feeling the squeeze, particularly with real wage growth lagging behind inflation.
While the UK’s inflation rate has taken a slight dip, the reality for many households remains challenging. The easing of energy costs has provided some respite, but rising food prices and persistent inflation in other areas, such as housing and services, continue to put pressure on the economy.
