UK’s inflation rate reduces for first time in 5 months

British inflation reduced in October for the first time since May, official figures showed on Wednesday, November 19, 2025.

The Office for National Statistics (ONS) announced that consumer price inflation dropped to 3.6% in October from 3.8% recorded in September, its joint-highest since January 2024.

The fall was in line with forecasts from both the Bank of England (BoE) and economists polled by Reuters.

Sterling weakened modestly against the United States dollar after the data, two-year gilt yields fell, and interest rate futures priced in a slightly faster pace of rate cuts for 2026.

“Cost of living is still a big burden on families right across the country, and that’s why, in the budget next week, I’ll be taking targeted action to bring down inflation to address the cost of living,” finance minister Rachel Reeves said.

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Some economists estimate that measures announced at last year’s budget, including a higher minimum wage, increased taxes on employers and other levies, have added as much as 1 percentage point to Britain’s inflation rate, which remains the highest among major advanced economies.

Earlier this month, the BoE forecast inflation would stay above its 2% target until mid-2027, largely due to wage growth that is faster than many BoE policymakers think is consistent with on-target inflation, given sluggish productivity growth.

Higher labour costs have been particularly felt across much of Britain’s services sector.

Services price inflation, which is watched closely by the BoE as a guide to longer-term domestic price pressures, fell slightly more than expected to 4.5% in October, its lowest since December 2024 and down from 4.7% in September.

The ONS stated that lower household electricity and heating bills and cheaper hotel room prices pushed down on inflation in October.

Core CPI, which excludes volatile food, energy, alcohol, and tobacco prices, slowed as expected to 3.4% in October from 3.5%.

However, food and drink inflation, which the BoE expects to reach a peak of 5.3% in December and views as influential on households’ expectations for future inflation, rose to 4.9% in October from 4.5%.

Separate figures from the ONS, published on Wednesday, showed factory gate prices rose by 3.6% in the 12 months to October, up from 3.5% in September.

The Star