In October, UK households experienced a favorable improvement in the cost of living as inflation decreased to 3.6%. This drop in the Consumer Prices Index (CPI) inflation from the previous month’s 3.8% marked the first decline since March, bringing inflation back to its lowest level since June.
Despite the decrease, the drop was not as significant as anticipated, with most economists predicting a fall to 3.5%. Notably, inflation remains above the Bank of England’s 2% target. The Office for National Statistics (ONS) attributed the decrease in inflation to lower energy bills in October, as gas and electricity prices rose less compared to the previous year.
Energy bills increased by 2% in October 2025 following a rise in the Ofgem price cap, significantly lower than the 9.6% surge seen in October 2024. Additionally, declining hotel prices contributed to lowering inflation. However, this was offset by a rise in food prices, which climbed from 4.5% to 4.9% in October.
This update precedes the Autumn Budget, where Chancellor Rachel Reeves aims to create room for the Bank of England to reduce interest rates by lowering inflation further. Grant Fitzner, chief economist at the ONS, highlighted that the decrease in inflation 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 inflation drop, emphasizing the importance of additional measures to reduce prices. The Bank of England’s inflation target stands at 2%, and previous interest rate adjustments aimed to curb inflation back to this level.
Inflation, a measure of price increases, impacts the cost of goods and services over time. The ONS tracks inflation using a basket of goods and services to represent consumer spending habits. Lower inflation does not indicate a halt in price increases but rather a slower rate of increase.
In the past, rising energy and food costs contributed to inflation spikes, with demand surges post-Covid and geopolitical events like the Ukraine conflict exacerbating price pressures. Inflation fluctuated over the years, hitting a peak of 11.1% in October 2022, dropping to 1.7% in September 2024, and rising again in subsequent months.
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