October saw a decrease in inflation to 3.6%, providing a positive impact on the cost of living for households in the UK.
The Consumer Prices Index (CPI) inflation rate dropped from 3.8% in September, August, and July, marking the first decline since March this year and returning inflation to its lowest level since June.
Although the decrease was not as significant as anticipated, with most economists predicting a drop to 3.5%, inflation remains above the Bank of England’s 2% target.
According to the Office for National Statistics (ONS), energy bills played a major role in driving down inflation in October, as gas and electricity costs rose less compared to the previous year.
In October 2025, energy bills increased by 2% following a rise in the Ofgem price cap, significantly lower than the 9.6% increase seen in October 2024. Additionally, a decrease in hotel prices contributed to the decline in inflation.
However, the rise in food prices partially offset these reductions, with food inflation climbing from 4.5% to 4.9% in October.
This update on inflation precedes the Autumn Budget, where Chancellor Rachel Reeves aims to lower inflation to create room for interest rate cuts by the Bank of England.
Grant Fitzner, ONS’s chief economist, noted, “Inflation eased in October, primarily due to lower increases in gas and electricity prices compared to the previous year following adjustments in the Ofgem price cap. Hotel prices also contributed to the decrease this month. However, rising food prices, following a dip in September, partially counteracted these effects.”
Chancellor Rachel Reeves commented, “The decrease in inflation is positive news for households and businesses nationwide, but I am committed to further reducing prices. At the upcoming Budget, I will make fair choices to address the public’s priorities of reducing NHS waiting lists, national debt, and the cost of living.”
Inflation reflects the rate of price increases. For instance, a 4% inflation rate means an item that cost £1 last year would now cost £1.04.
A lower inflation rate does not signify a halt in price increases but rather a slower pace of increase. The ONS calculates inflation based on a “basket of goods” and services that represent typical household purchases.
The Bank of England targets a 2% inflation rate and has adjusted interest rates to combat inflation and bring it back to this level.
Inflation began rising in 2021, peaking at 11.1% in October 2022 due to higher energy and food costs. The demand for energy surged post-Covid and was exacerbated by the conflict in Ukraine, driving up food prices as well.
In September 2024, inflation hit a three-year low of 1.7% before starting to rise again in October.
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