UK inflation slowed in October, which has further raised hopes that the Bank of England will cut interest rates again at its next meeting.
The consumer price index rose 3.6% year-on-year, down from 3.8% in September, the Office for National Statistics said, with the reduction driven by more modest energy price rises and a fall in hotel costs.
Core inflation, which strips out more volatile prices such as energy and food, eased to 3.4% from 3.5%, while services inflation, which is tracked by the BoE's monetary policy committee as a measure of persistent inflation, fell to 4.5% from 4.7%.
“Inflation eased in October, driven mainly by gas and electricity prices, which increased less than this time last year following changes in the Ofgem energy price cap,” said ONS chief economist Grant Fitzner. He added that a decline in hotel prices was partially offset by a renewed rise in food prices.
Economists said the latest data increases the likelihood of interest rate cuts.
"Inflation has now passed its peak. Headline inflation is expected to remain at similar levels over the final months of this year before drifting downwards through next year."
He points out that the minutes of November’s MPC meeting suggested tighter fiscal policy and further progress on inflation before the December decision would be key to whether there will be a majority in favour of a rate cut.
"Today's data fulfils one of those criteria and keeps the MPC on track to deliver a 25bps rate cut next month," he said.
Sanjay Raja, chief UK economist at Deutsche Bank, said the MPC "now has a clearer path for a Christmas rate cut".
"With the labour market softening more than expected, GDP growth weaker than the BoE projected, and (underlying) inflation tracking a little lower than BoE expectations, we think Governor Bailey – who will likely have the deciding vote for December – will feel more confident about cutting Bank Rate below 4%."
Pantheon Macroeconomics’ Rob Wood was more confident about the 18 December meeting, saying the ONS data “leaves a rate cut next month nailed-on”, adding that while headline inflation slowed slightly less than expected, services inflation was weaker than the MPC had forecast.
While the easing in inflation provides enough reason for the MPC to cut in December, Wood said there was also "enough to point to a lengthy delay until another cut", due to erratic factors helping the services slowdown.
Economists expect inflation to remain around current levels through the end of the year before trending lower in 2026, helped by base effects in energy and softer food and services prices.