Inflation, which measures the rate at which consumer prices rise, dropped to 4.6% in the year to October, down from 6.7% the month before. The figure means a government pledge to halve inflation by end of the year has been met early. But there is a limit to how much credit ministers can take for the fall as energy prices settle. Economists have said the main reason inflation has fallen from its peak of 11.1% in October 2022 is due to a fall this month in the energy price cap, which limits what suppliers can charge consumers per unit of energy. They also note the Bank of England's decision to raise interest rates, in a bid to cool demand in the UK economy and slow price rises. Rates are currently at 5.25%, a 15-year high, which has pushed up mortgage costs but also meant higher savings rates.
Grant Fitzner, chief economist at the Office for National Statistics (ONS), said inflation fell as "last year's steep rise in energy costs has been followed by a small reduction in the energy price cap this year". He added food prices were little changed last month, but said hotel prices had fallen. Although the signs point to the cost of living easing, many households will not feel better off, especially when it comes to energy bills. Despite gas and electricity prices being lower than last year, most households will actually pay more for energy this winter than last because government support for bills is no longer in place. Falling inflation also does not mean that most goods and services are cheaper to buy, rather that prices are rising less quickly.
'Legacy of higher prices'
James Smith, research director at the Resolution Foundation think tank which focuses on the living standards of people on low-to-middle incomes, said "the cost-of-living crisis is far from over". "The scale of Britain's inflation shock has left a legacy of far higher prices," he said. "Over the past two years, the cost of energy has surged by 49% while food prices have risen by 28% - far greater than the 14% in average earnings over this period."