By Chris Dorrell
Inflation fell fast in October thanks to falling energy prices, giving a boost to the Bank of England and Prime Minister Rishi Sunak.
According to figures from the Office for National Statistics (ONS), the consumer price index (CPI) came in at 4.6 per cent in October, down from 6.7 per cent the month before.
Economists had expected inflation would fall to 4.7 per cent in October.
“Inflation fell substantially on the month, as last year’s steep rise in energy costs has been followed by a small reduction in the energy price cap this year,” ONS Chief Economist Grant Fitzner said.
The sharp fall means Sunak is all but certain to meet his target of halving inflation by the end of the year. It stood at just over 10 per cent at the beginning of the year.
Although the Bank of England has left interest rates on hold for two consecutive meetings, members of the Monetary Policy Committee (MPC) have been warning that more needs to be done to tackle inflation.
In its November Monetary Policy Report, the Bank forecasted that inflation would remain above its target until the end of 2025. The MPC said that monetary policy needed to be “restrictive for an extended period of time”.
Mark Taheny, Senior Director at corporate finance advisor Centrus, warned the figures were at risk of being sent one way or the other by events well outside of the Bank’s control.
“Geopolitical factors will continue to play a huge role in the energy market so businesses must be wary of potential shocks in coming months. As commodity prices are more volatile than ever, they are becoming increasingly headline dependent, leading to a growing anticipation that we are one bad headline away from a significant daily move,” he said this morning.
While Huw Pill, the Bank’s chief economist, appeared to suggest that rate cuts could come as soon as next summer, Andrew Bailey has stressed that “it is too early” to talk about cutting interest rates.
Inflation is expected to remain stubborn over 2024 due to a strong labour market. Figures out yesterday showed that wages continued to rise at near-record levels, although the rate of increase had eased slightly.
More to follow
