Drop in consumer price index prompts speculation over Bank of England’s next move on interest rates
UK inflation fell to 3.6% in October, marking a decrease from 3.8% in September and aligning with economists’ forecasts.
The latest figures from the Office for National Statistics (ONS) suggest that price growth may have reached its peak, with the Bank of England previously indicating that September’s rate was likely the high point for this cycle.
The ONS attributed the slowdown mainly to smaller increases in gas and electricity prices compared to the previous year, following changes to the Ofgem energy price cap. Lower hotel costs also contributed to the decline, while rising food prices partially offset these effects.
The Consumer Prices Index (CPI) rose by 3.6% in the 12 months to October 2025, down from 3.8% in September 2025.
— Office for National Statistics (ONS) (@ONS) November 19, 2025
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“Today’s fall in inflation will be welcome news for consumers, particularly those hoping to take their next step onto the housing ladder, as it provides a greater sense of stability and confidence,” said Nathan Emerson, chief executive of industry body Propertymark.
“However, inflation still needs to move sustainably below the Bank of England’s 2% target before we are likely to see more meaningful reductions in interest rates. Continued progress will be crucial in improving long-term affordability and helping people plan their next move with greater certainty.”
Attention is now turning to the upcoming Budget, where measures to address inflation and the cost of living are expected to be announced. Chancellor Rachel Reeves is preparing to deliver her tax and spending statement on Nov. 26, with the aim of easing living costs and supporting the Bank of England’s efforts to lower interest rates.
“Inflation dropping to 3.6% is a positive indicator that regardless of what comes from next week’s budget, we could see another base rate cut from the Bank of England this year,” said Nick Hale, chief executive officer at conveyancing services provider Movera. “Whether Reeves will be able generate growth while tackling rising living costs and paving the way for even more base rate cuts with this budget, only time will tell.”
Borrowing costs have been reduced five times since Labour took office in July 2024, with the most recent base rate cut in August. The Bank of England has indicated that inflation may have peaked, raising the possibility of a further reduction in borrowing costs after the Budget.
“After a year of increasing prices, it looks like inflation is finally starting to slow down, which will come as a relief to under-pressure households,” said Richard Pike, chief sales and marketing officer at mortgage servicing provider Phoebus Software. “It’s a much-needed pre-Budget boost for Rachel Reeves, who is looking for some rays of light on the economy amid the recent gloom. We’re all eagerly awaiting to see what she can pull out of the hat in next week’s budget to bring the economy back on track, with the Government’s position changing almost daily.
“The drop in inflation, along with a cooling labour market and the prospect of fiscal tightening in the budget, strengthens the case for the Bank of England to deliver an early Christmas present for borrowers and cut the base rate in December. This would help alleviate affordability pressures, unlock greater borrowing potential and support increased mortgage activity – providing a much-need boost for the market.”
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