970x125
UK inflation drops to 3.6% in October ahead of crunch budgetRichard PartingtonBREAKING: UK inflation dropped to 3.6% in October, easing pressure on households and providing a boost for Rachel Reeves as the chancellor prepares for her make-or-break budget next week.The Office for National Statistics (ONS) said annual inflation as measured by the consumer prices index cooled for the first time in five months, declining from a peak of 3.8% over July, August and September.Reeves has vowed to cut living costs in her highly anticipated tax and spending statement on 26 November, including measures to bring down the inflation rate to smooth the path for the Bank of England to cut interest rates.Threadneedle Street opened the door earlier this month to a post-budget cut in borrowing costs in December after it signalled inflation had probably peaked amid mounting fears over the strength of the economy.Borrowing costs have been cut five times since Labour came to power in July 2024, with the last reduction made in August.Our main story here: ShareKey eventsShow key events onlyPlease turn on JavaScript to use this featureAverage UK house figures increased by 2.6% in SeptemberData alert: Another batch of figures released by the ONS this morning shows a 2.6% rise in UK house prices in September.That is the smallest annual rise since May this year, and compares to the August reading of 3.1% (following an upward revision to the figures).Average UK house prices increased by 2.6%, to £272,000 in the 12 months to September 2025, down from 3.1% in the 12 months to August.Average UK private rents rose by 5.0%, to £1,360 in the 12 months to October 2025, down from 5.5% in the 12 months to September. pic.twitter.com/1g6qG2dN8D— Office for National Statistics (ONS) (@ONS) November 19, 2025
That was helped by a drop in private sector rents in October, which were 5% higher than a year earlier but lower than the 5.5% annual increase recorded in September.That is also the smallest increase in over three years, in August 2022.Commenting on today’s house price data for September 2025 and rents data for October 2025, ONS Head of Housing Market Indices Aimee North said: (quote 1 of 2) pic.twitter.com/RieUbQVywX— Office for National Statistics (ONS) (@ONS) November 19, 2025
970x125
ShareToday’s 3.6% CPI inflation reading was shallower than some economists had expected, but even those analysts say this is unlikely to stand in the way of another Bank of England rate cut.But BoE governor Andrew Bailey continues to be the hinge vote.Andrew Bailey, Governor of the Bank of England, could cast the deciding vote on interest rate cuts in December. Photograph: Maja Smiejkowska/APJames Smith, developed markets economist covering the UK at ING, says UK inflation “is undoubtedly past the peak” and is likely to follow the eurozone in seeing food price levels ease off:
Fortunately, evidence from the eurozone – where fresh food inflation is falling – coupled with a levelling off in the newly-reinstated producer price data for food products, suggests inflation at the supermarkets is probably more or less at its peak.
Services inflation also eased from 4.7% to 4.5%, with the drop principally down to air fares, and restaurant and cafe prices – often seen as a bellwether for “persistence” among services categories – increased sharply on the month.However that is potentially linked to the broader food price pressure, Smith explained.Smith adds:
That said, taking a broader view, services is still generally heading in the right direction once you ignore the month-to-month volatility.
Remember too that wage growth in the private sector is easing rapidly.
We doubt there’s anything that will shake the conviction of the Bank’s doves, who argue immediate easing is necessary to offset potential weakness emanating from the jobs market.
This leaves Bailey the deciding factor in December’s rate decision:
The bottom line here is that there’s unlikely to be anything in this data that will change the minds of many voters on the BoE committee.
That means the decision continues to hinge on governor Andrew Bailey, who is somewhere between the two camps – though given he is more sympathetic to the view of the doves, we think he will still tip the balance in favour of a cut in December.
SharePhillip InmanAfter three months on a high plateau, inflation is beginning to ease again.The drop from 3.8% to 3.6% in the October consumer prices index sets the UK on a downward path that reduces the pressure on shoppers, businesses and the government.Never mind that City economists had expected a fall last month. It appears to be a turning point back towards normality after a topsy-turvy year that everyone wants to put behind them.A little more than 12 months ago the pace of prices growth fell as low as 1.7% and it looked like inflation was beaten, but then came a resurgence in gas and electricity bills and most shockingly for the general public, a return of rocketing food prices.There were global effects on prices from Donald Trump’s tariffs and domestic pressures from government tax increases in the 2024 budget.Rachel Reeves has given strong hints that unlike last year there will be measures in the budget next week to accelerate the fall in prices. A cut in the 5% VAT rate on energy is the leading contender, but there could be more.On Tuesday night Reeves lent her support for a competition crackdown on the dentistry industry and vet businesses, both of which have undergone a merger mania, prompting concerns about monopoly pricing practices.The chancellor knows that most governments caught in the inflation spiral of 2022-23 were kicked out of office. She is desperate that high inflation does not get added to the checklist of grievances against Labour at the next election.Read more here:ShareWH Smith CEO resigns after probe into accounting issuesJoanna PartridgeElsewhere this morning, there’s upheaval at WH Smith, as my colleague Joanna Partridge reports:WH Smith’s chief executive has stepped down with immediate effect, after a review found accounting failures in its North American division, prompting the retailer to slash its profit outlook.Carl Cowling, who has been WH Smith’s group chief executive for six years, will be replaced on an interim basis by the company’s UK boss Andrew Harrison until a permanent replacement is found.Cowling’s departure came as an independent investigation by Deloitte found “shortcomings” in the retailer’s North American division which overstated supplier income, which led the group to overstate profits at its US business by as much as £50m.Annette Court, WH Smith’s chair, apologised and said the company recognised “the importance of strengthening controls, governance and reporting procedures across the group.”Court added:
Our priority now is to rebuild trust and credibility and to improve the performance and profitability of our North America division.
We are confident that the actions we have taken and will continue to implement over the months ahead will ensure a strong foundation for the business going forward.
Nearly £600m was wiped off WH Smith’s market value in August when it discovered the American accounting blunder, forcing the company to cut its forecasts.The revelations saw its shares take a one-day plunge of 42%, from which they have not yet recovered, which left WH Smith reeling shortly after the sale of its high street business, which has been rebranded as TGJones by its new owners.Deloitte’s review found weaknesses in the composition of the US finance team, as well as insufficient systems, controls and review procedures for supplier income in its commercial and finance teams. It also found the group had limited oversight of US finance processes.WH Smith shares are down 2.36% this morning.ShareMeanwhile, it’s a mixed picture for key stock indexes across Europe:FTSE 100 is down 0.14%Italy’s FTSE MIB is down 0.6%Frances’ CAC 40 is flatGermany’s XETRA DAX opened up slightly higher by 0.04%Spain’s IBEX 35 is up 0.17%ShareUK borrowing costs ease after dip in UK inflationUK government borrowing costs have eased on the back of this morning’s CPI data.The yield on the 2-year gilt has fallen 0.028% to 3.776%A view of the 2-year gilt yield following the dip in UK CPI. Photograph: Refinitiv/ReutersMeanwhile, the yield on 10-year UK government bonds is down around 0.018% at 4.539%.ShareWhile inflation has dipped, Octobers’ rise in food inflation is raising concerns, especially as businesses and households edge towards the Christmas season.That includes unions, which are worried about how higher prices of essential goods are impacting struggling families heading into the winter months.Unite general secretary Sharon Graham said:
Today’s figures will bring no comfort to the millions of families having to choose between heating and eating this winter.
Food prices are going through the roof, with many essentials now costing a quarter more than they did three years ago and still rising.
Workers are demanding the government tackle the cost-of-living crisis and that must begin with next week’s budget.
Karen Betts, chief executive of the Food and Drink Federation (FDF) says manufacturers are paying nearly 40% more for ingredients and energy than they were before the Covid-19 pandemic in January 2020.She notes they are are also shouldering the costs of new regulations including new packaging taxes and increases to employers’ national insurance contributions.Betts says this has put food manufacturers on edge about further hits from next week’s budget:
Hard-pressed food and drink companies are finding they simply have no choice but to increase prices.
As the budget approaches, food manufacturers are nervous, with nine in ten worried about the impact of additional costs and taxes on food prices.
We want instead to see government step up and support our sector, by protecting businesses from unwelcome tax surprises and partnering with us to drive growth and build resilience, to help prevent future price rises for shoppers.
ShareThis marks the first drop in the rate of annual inflation in five months, and is raising expectations that the Bank of England will cut the base rate – currently sitting at 4% – at its next monetary policy meeting in December.However, there are still some variables, not least the contents of the chancellor’s budget next week.George Brown, senior economist at Schroders, said:
Evidence inflation has peaked should tip the scales towards a December rate cut.
But any further rate cuts will largely depend on the contents of the chancellor’s red box. If VAT and green levies are eliminated from household energy bills, inflation could fall by as much as half a percentage point.
But we remain concerned that broader price pressures will prove persistent.
Wage growth is still well above a target-consistent pace, especially given repeatedly weak productivity. The Bank must tread carefully given the heightened risk that high inflation becomes entrenched.
ShareFalling gas and electricity prices were the main drivers for the fall in annual inflation this month, according to the Office for National Statistics (ONS).That was alongside hotels, where monthly prices fell by 2.2%, compared with a fall of 0.2% a year ago.It helped offset a rise in prices for food and non-alcoholic drinks, which increased to 4.9%, with bread and cereals leading a rise in prices, up 0.02 percentage points.ShareChancellor Rachel Reeves will be celebrating the positive data just days ahead of her autumn budget, giving her a chance to point to tangible changes in pricing for consumers.In a statement issued by HMT this morning, Reeves says:
This fall in inflation is good news for households and businesses across the country, but I’m determined to do more to bring prices down.
That’s why at the budget next week I will take the fair choices to deliver on the public’s priorities to cut NHS waiting lists, cut national debt and cut the cost of living.
ShareShareUK inflation drops to 3.6% in October ahead of crunch budgetRichard PartingtonBREAKING: UK inflation dropped to 3.6% in October, easing pressure on households and providing a boost for Rachel Reeves as the chancellor prepares for her make-or-break budget next week.The Office for National Statistics (ONS) said annual inflation as measured by the consumer prices index cooled for the first time in five months, declining from a peak of 3.8% over July, August and September.Reeves has vowed to cut living costs in her highly anticipated tax and spending statement on 26 November, including measures to bring down the inflation rate to smooth the path for the Bank of England to cut interest rates.Threadneedle Street opened the door earlier this month to a post-budget cut in borrowing costs in December after it signalled inflation had probably peaked amid mounting fears over the strength of the economy.Borrowing costs have been cut five times since Labour came to power in July 2024, with the last reduction made in August.Our main story here: ShareIntroduction: UK inflation forecast to show decline from recent peak of 3.8%Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.Inflation in the UK is forecast to have dipped to an annual rate of 3.6% in October from 3.8% in September, according to City economists, in a move that could give chancellor Rachel Reeves a leg-up ahead of next week’s crucial budget.If forecasts prove correct, it would be the first time in five months that annual inflation, measured by the consumer price index (CPI), will have cooled.A lower reading would give the government some good news, signalling some easing for particularly for hard-pressed consumers, having vowed to cut living costs in her 26 November autumn tax and spending statement.It would also raise hopes of another interest rate cut from the Bank of England.Morningstar’s UK economist Grant Slade, who is expecting a slowdown in annual inflation in October to 3.6%, says:
Having reared its ugly head once more in 2025, inflation likely peaked in September when transport costs exerted upward pressure on headline CPI.
The disinflation process remains intact, in our view.
A weakening labour market and well-anchored long-term inflation expectations should allow for the impact of prior supply-side shocks to fade progressively over the coming quarters.
The official figures are released at 7am.But barring any significant surprises, it still means inflation is holding well-above the government’s 2% target, marking the 13th successive month that CPI has surpassed that level.The International Monetary Fund forecast last month that UK households would experience the highest inflation rate in the G7 this year and next.The agenda
7am GMT: UK CPI inflation for October
9.30am GMT: ONS house price and rents data
10am GMT: Eurozone inflation (final reading) for October
1.30pm GMT: US Housing starts
7pm GMT: US Federal Reserve publishes the minutes from the October FOMC meeting
Share
970x125
