In October, inflation in the UK decreased to 3.6%, providing a positive boost to the cost of living for households. This drop in the Consumer Prices Index (CPI) inflation rate from the previous 3.8% recorded in September, August, and July represents the first decline since March this year, bringing inflation back to its lowest level since June.
Although economists had anticipated a larger decline 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 as gas and electricity costs rose less compared to the previous year.
Energy bills rose by 2% in October 2025 after an increase in the Ofgem price cap, a significant decrease from the 9.6% surge seen in October 2024. Additionally, reduced hotel costs contributed to lowering inflation. However, the rise in food prices, rebounding from a dip in September, partially offset these declines, with food inflation climbing from 4.5% to 4.9% in October.
This inflation update precedes the Autumn Budget next week, where Chancellor Rachel Reeves aims to create room for potential interest rate cuts by reducing inflation further. Grant Fitzner, chief economist at the ONS, highlighted that the easing of inflation was primarily driven by lower energy prices and declining hotel costs, partially balanced by increasing food prices and ongoing rises in raw material costs for businesses.
Chancellor Rachel Reeves expressed determination to further reduce prices during the upcoming Budget to address public priorities such as cutting NHS waiting lists, reducing national debt, and easing the cost of living. Inflation, a measure of price increases, reflects the rate at which prices are rising, impacting consumer purchasing power.
The Bank of England targets a 2% inflation rate and has adjusted interest rates to manage inflation levels. However, higher interest rates can strain households, as seen with the recent rate adjustments. Inflation had spiked to 11.1% in October 2022, driven by energy and food cost escalations exacerbated by various factors such as increased energy demand post-Covid and supply chain disruptions due to geopolitical events.
Following a brief decline in September 2024 to 1.7%, inflation started to rise again in October, highlighting fluctuations in economic conditions impacting consumer prices.