The latest data shows that inflation in the UK decreased to 3.6% in October, providing a positive development for British households.
The Consumer Prices Index (CPI) inflation rate dropped from 3.8% in September, August, and July, marking the first decline since March and returning inflation to its lowest level since June.
Although the decrease was not as significant as anticipated, with most economists forecasting a drop to 3.5%, inflation remains above the Bank of England’s target of 2%.
The Office for National Statistics (ONS) highlighted that energy bills played a major role in driving inflation down in October, as gas and electricity costs rose less than the previous year.
In October 2025, energy bills increased by 2% following adjustments to the Ofgem price cap, a notable decrease from the 9.6% hike seen in October 2024. Additionally, lower hotel prices contributed to the decline in inflation, according to the ONS.
However, the rise in food prices, rebounding from a dip in September, partially offset these decreases. Food inflation climbed from 4.5% to 4.9% in October.
This update on inflation precedes the Autumn Budget scheduled for next week. Chancellor Rachel Reeves expressed her desire for inflation to decrease, allowing room for the Bank of England to reduce interest rates.
Grant Fitzner, the ONS’s chief economist, stated, “Inflation eased in October primarily due to lower gas and electricity prices compared to the previous year following changes in the Ofgem price cap. Hotel costs contributed to the decline this month, but rising food prices offset some of these reductions.”
Chancellor Rachel Reeves remarked, “The decline 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 decisions to address public priorities such as reducing NHS waiting lists, national debt, and the cost of living.”
Inflation measures the rate of price increases. For instance, an inflation rate of 4% means that an item priced at £1 last year would now cost £1.04.
A lower inflation rate does not imply that prices have stopped rising; rather, they are increasing at a slower pace than before.
The ONS calculates inflation based on a regularly updated selection of goods and services that reflect household spending habits.
While the headline inflation figure represents an average, individual prices of specific goods may be higher or lower than this general figure.
The Bank of England targets 2% inflation and has adjusted interest rates to bring inflation back to this level over the past couple of years.
The rationale behind this approach is that higher interest rates increase borrowing costs, limiting disposable income. Reduced spending leads to lower demand and subsequently lower prices, contributing to lower inflation rates.
Despite these efforts, the elevated base rate led to higher mortgage payments for many homeowners, straining household finances. The base rate, which was at 0.1% in December 2021, reached a peak of 5.25% in August 2023 but has since been reduced to 4% through five rate cuts.
Inflation began to climb in 2021 and peaked at 11.1% in October 2022, primarily driven by increased energy and food costs.
The surge in energy demand post-Covid, aggravated by the conflict in Ukraine, drove up energy prices, while the war also contributed to higher food prices due to increased input costs.
After reaching a three-year low of 1.7% in September 2024, inflation began to rise again in October of the same year.
Receive our money-saving tips and top offers directly in your inbox with the Mirror Money newsletter.