- CPI falls to 4.6% – a two year low
- Fall in energy prices primarily responsible
- Food inflation still in double digits but falls to 10.1%
Danni Hewson, head of financial analysis at AJ Bell, comments on the latest UK inflation numbers:
“Whilst we’re not talking about deflation, in fact many prices are still rising substantially, this fall in the headline rate of inflation will be psychologically important.
“Not only has CPI come in under 5% but it’s reached a two-year low and the number released this morning was cooler than had been expected.
“This time last year households were enduring the worst impact of the cost-of-living crisis. Energy bills had shot up, even with the government’s price cap, and the cost of keeping the lights on was causing a huge amount of distress for many businesses and individuals.
“This October falling energy costs are primarily responsible for this fall in the headline rate. But remember whilst bills have come down households aren’t getting those monthly payments which helped to offset the worst impact of those hikes last year.
“Food inflation is still in double digits and whilst many people are now feeling the benefit of real term wage increases budgets are still tight and any savings are likely to be long gone.
“It’s important not to get swept up in the wave of optimism and forget those people on the lowest incomes for whom the last couple of years have been debilitating.
“But for homeowners with a fixed rate mortgage due to come to an end in the next twelve months, today will bring relief.
“Market expectation that we have reached peak interest rates has solidified today and only three percent think the Bank of England will hike rates when it meets next month. Forty percent expect rates will start to fall in May next year, getting as low as 4.25% by the end of the year, and that expectation has already begun to filter through to lenders.
“Consumer confidence, households with a bit more money in their pockets and a sense of optimism about the future are all massively important things for business, for jobs and for growth, so today’s figures will likely leave many with a distinctly warmer feeling than in recent months.”
