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UK Inflation Eases to 3.6% in October, Bolstering Case for December Rate Cut

A smaller rise in the Ofgem energy cap cooled bills, sharpening the focus on how next week’s Budget will shape the outlook.

Federal Reserve Chair Jerome Powell takes questions from reporters during a news conference following a meeting of the Federal Open Market Committee at the Federal Reserve on October 29, 2025 in Washington, DC.
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Overview

  • Official ONS data show CPI slowed to 3.6% from 3.8% in September, the lowest since June and a touch above the 3.5% consensus forecast.
  • Energy was the main drag as gas and electricity rose less than a year ago after a 2% price-cap increase versus a 9.6% rise last year, with hotel prices also falling.
  • Food inflation rebounded to about 4.9%, led by higher prices for bread and cereals and other staples, tempering the headline fall.
  • A Reuters poll finds nearly 80% of economists expect the Bank of England to cut Bank Rate by 25 bps to 3.75% on Dec. 18, after a 5–4 vote to hold at 4% earlier this month.
  • Rising input and factory-gate costs and the possibility of a November uptick keep risks in play, and economists say the Nov. 26 Budget is a key factor for the BoE’s next move.