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UK Inflation Slows to Four-Month Low
19 Nov
Summary
- UK inflation dropped to 3.6% in October, the lowest in four months.
- Falling domestic energy bills were the primary driver of the inflation decrease.
- Economists anticipate a Bank of England interest rate cut next month.
Official figures revealed that U.K. inflation cooled to a four-month low of 3.6% in October, down from 3.8% in September. This decline was primarily influenced by reduced domestic energy costs, although a partial rebound in food prices offset some of the downward pressure. Despite remaining above the Bank of England's 2% target, the current economic climate, marked by a weakening labor market and stalled growth, is increasing the likelihood of a rate cut.
The Bank of England's Monetary Policy Committee is now widely expected to sanction a quarter-point reduction in interest rates at its upcoming meeting on December 18. This anticipation follows the bank's earlier decision to hold rates steady at 4%, with a narrow majority of policymakers requiring further evidence of falling inflation.
This inflation data emerges just before Treasury chief Rachel Reeves is set to deliver her budget, where tax increases are broadly anticipated to address public finance shortfalls. Reeves has indicated plans for targeted measures to alleviate the cost of living, though economists suggest rate-setters may wait to assess the budget's impact before finalizing any further rate reductions.
