UK Inflation Falls for First Time in 7 Months

Inflation in the United Kingdom fell for the first time in seven months, signaling that price pressures have passed their peak ahead of important decisions by the Bank of England and Chancellor of the Exchequer Rachel Reeves, Bloomberg News reported on Wednesday.

Economic Details and Bank of England Expectations

• Consumer Price Index (CPI): The Office for National Statistics (ONS) announced on Wednesday that consumer prices rose 3.6% in October year-on-year, down from 3.8% in September. The data was slightly higher than Bloomberg's forecast (3.5%) but aligned with the Bank of England's expectations.

• Reasons for the Drop: The decline to the lowest inflation rate since June was driven by a smaller rise in energy prices compared to September, along with lower gas and electricity bills and hotel room prices.

• Services Inflation: Services price inflation, closely watched by the Bank of England, dropped to 4.5% in October from 4.7% in September, a slightly larger decrease than economists' consensus forecast of 4.6%.

• Core Inflation: Core CPI (excluding volatile food, energy, alcohol, and tobacco prices) slowed to 3.4% in October, in line with expectations.

• Food Inflation: Food and non-alcoholic beverage inflation rose to 4.9% in October from 4.5%. The Bank of England expects it to peak at 5.3% in December.

Rate Cut Scenario and Government Stance

• Market Bets: Today's figures revived hopes for a Bank of England interest rate cut before Christmas at its next meeting, after skipping a rate reduction earlier this month. Market bets on a rate cut increased, with an 80% chance priced in for a reduction next month.

• Expert Analysis: Martin Beck, Chief Economic Advisor at (WPI Strategy), stated that with inflation now on a sustainable downward path, coupled with slowing economic growth and a significant fiscal tightening expected in next week's budget, the conditions are set for the Bank of England to cut rates in December.

• Chancellor's Comments: Chancellor Rachel Reeves reaffirmed her determination to "do more to bring prices down" and reiterated that the budget aims to cut healthcare waiting lists, reduce national debt, and lower the cost of living, while seeking to avoid tax and spending measures that could increase inflation.