In October, inflation in the UK decreased to 3.6%, bringing relief to households. The Consumer Prices Index (CPI) inflation rate dropped from 3.8% in the previous three months, marking the first decline since March and returning to its lowest level since June.
Despite expectations of a larger decrease to 3.5%, 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, particularly gas and electricity costs which rose by a smaller margin compared to the previous year.
Energy bills rose by 2% in October 2025 due to an increase in the Ofgem price cap, significantly lower than the 9.6% surge in October 2024. Additionally, declining hotel prices contributed to the reduction in inflation. However, this was partly offset by higher food prices, which rose from 4.5% to 4.9% in October.
This latest inflation update precedes the Autumn Budget, with Chancellor Rachel Reeves expressing the desire for inflation to decrease, allowing the Bank of England room to lower interest rates. Grant Fitzner, ONS chief economist, highlighted the impact of lower energy prices and declining hotel costs on the overall inflation rate.
Chancellor Rachel Reeves emphasized the importance of lowering prices for households and businesses, promising to address this issue in the upcoming Budget. Inflation, a measure of price increases, indicates the rate at which prices are rising. The ONS calculates inflation based on a basket of goods and services regularly purchased by households.
The Bank of England aims for 2% inflation and has adjusted interest rates to manage inflation levels. Despite efforts to control inflation, increasing interest rates have led to higher mortgage payments for homeowners. Inflation rose in 2021, reaching a peak of 11.1% in October 2022 due to escalating energy and food costs.
The ongoing conflict in Ukraine and the impact of the Covid pandemic have further exacerbated inflationary pressures. Inflation decreased to 1.7% in September 2024 before rising again in October.