The Office for National Statistics revealed that UK inflation fell to 3.6% in the 12 months to October, in line with expectations.
The latest reading was the lowest in four months, down 0.2% from September’s 3.8%.
Housing and household services contributed the most to the decline in the monthly change, while food and non-alcoholic beverages contributed the most to the offsetting rise.
On November 6, the Bank of England decided to maintain the benchmark interest rate at 4% after the market predicted that it might unexpectedly cut interest rates.
In making the decision, central bank governor Andrew Bailey said inflation of 3.8% was still too high.
He added: “In our decision to keep interest rates on hold today, we balanced the risk that inflation remains above target for a sustained period with the risk of weaker demand in the economy, which could lead to inflation falling too low.
“If inflation remains on track, we expect to be able to further gradually cut interest rates.”
The next Monetary Policy Committee meeting will be held on December 18, which will be the last meeting of the year.
Sarah Pennells, consumer finance expert at Royal London, described the latest inflation data as “a welcome gift ahead of the festive season” and said it was “a step in the right direction as many households still find it difficult to balance their budgets”.
Pennells commented: “Our research shows that one in 10 people (10%) are struggling to pay their household bills, a further 3% are facing a financial crisis and only a quarter describe themselves as comfortable.”
Meanwhile, Alice Haine, Bestinvest personal finance analyst at Evelyn Partners, said: “The latest inflation data is in line with the Bank of England’s prediction that inflation will peak in September, although the figure is still high and well above the central bank’s 2% target – a level not seen in more than a year.”
“While softer inflation may give Chancellor Rachel Reeves some breathing room, weak economic growth, a struggling jobs market and low consumer confidence still pose challenges.”
On the other hand, Nick Hale, chief executive of Movera, noted: “Inflation falling to 3.6% is a positive indicator and regardless of next week’s budget we are likely to see the Bank of England cut the base rate again this year.”
“Only time will tell whether Reeves can deliver economic growth while tackling rising living costs and pave the way for further cuts to the base rate.”
“What is really important is that this budget considers the impact that a further slowdown in property transactions could have. At a time when many potential buyers have paused waiting for a better deal, imposing a ‘mansion tax’ or increased stamp duty on parts of the market would have a devastating impact on future transaction volumes and the wider property industry.”
“However, the introduction of another short-term policy – such as stamp duty relief – could also hit the industry like a bolt from the blue and cause a sharp increase in buying.
