UK households received a positive boost as inflation decreased to 3.6% in October.
The Consumer Prices Index (CPI) inflation rate dropped from the previous 3.8% recorded in September, August, and July, marking the first decline since March this year and bringing inflation back to its lowest level since June.
Although the decrease was not as significant as anticipated, with most economists predicting a fall to 3.5%, inflation remains above the Bank of England’s 2% target.
The Office for National Statistics (ONS) attributed the decline in inflation in October to lower energy bills, particularly as gas and electricity prices rose less compared to the previous year.
Energy bills increased by 2% in October 2025 following an Ofgem price cap adjustment, significantly lower than the 9.6% surge seen in October 2024. Additionally, a decrease in hotel prices contributed to the overall reduction in inflation.
However, rising food prices partially offset these declines, as food inflation climbed from 4.5% to 4.9% in October.
This latest inflation update precedes the Autumn Budget, where Chancellor Rachel Reeves aims to create room for the Bank of England to lower interest rates by reducing inflation.
Grant Fitzner, the chief economist at the ONS, highlighted that the easing of inflation in October was primarily driven by lower energy prices and reduced hotel costs, although food prices saw an increase following a dip in September.
Chancellor Rachel Reeves expressed satisfaction with the decline in inflation, emphasizing the importance of further price reductions in the upcoming Budget to address public priorities, including cutting NHS waiting lists, national debt, and the cost of living.
Inflation serves as a gauge of price fluctuations, indicating how the cost of goods and services changes over time. A lower inflation rate suggests that prices are still rising, albeit at a slower pace.
The ONS calculates inflation based on a standard “basket of goods” and services to reflect consumer spending patterns, although individual price variations may exist.
The Bank of England targets a 2% inflation rate and adjusts interest rates to manage inflation. Higher interest rates increase borrowing costs, reducing spending and lowering demand, ultimately leading to price stability.
In response to rising inflation, the Bank of England raised interest rates gradually over two years to curb inflation, but subsequent rate reductions aimed to alleviate financial pressure on homeowners. The current base rate stands at 4% after peaking at 5.25% in August 2023.
Inflation surged to 11.1% in October 2022 due to escalating energy and food prices. The energy demand spike post-Covid, exacerbated by the Ukraine conflict, led to increased costs. In September 2024, inflation hit a three-year low of 1.7% before edging up in October.
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