In October, UK households received a positive boost as inflation decreased to 3.6%, down from the 3.8% recorded in the previous three months. This drop, the first since March, brought inflation back to its lowest level since June. While economists anticipated a larger decline to 3.5%, inflation remains above the Bank of England’s 2% target.
According to the Office for National Statistics (ONS), energy bills played a significant role in driving down inflation in October. Gas and electricity prices saw a more moderate increase compared to the previous year. Energy bills rose by 2% in October 2025 following an adjustment in the Ofgem price cap, a notable decrease from the 9.6% surge in October 2024. Additionally, reduced hotel costs contributed to the decline in inflation.
However, the impact of rising food prices partially offset these decreases. After a decline in September, food inflation rose from 4.5% to 4.9% in October. This latest inflation update precedes the upcoming Autumn Budget, where Chancellor Rachel Reeves aims to create room for interest rate cuts by lowering inflation.
Grant Fitzner, chief economist at the ONS, highlighted the factors behind the inflation easing in October. He noted that lower gas and electricity prices, alongside reduced hotel expenses, were key drivers, although food prices experienced an increase following a dip in the previous month.
Chancellor Rachel Reeves expressed optimism about the inflation decrease, emphasizing the importance of further price reductions. Reeves intends to address public priorities, including reducing NHS waiting lists, national debt, and the cost of living, in the upcoming Budget.
Inflation serves as a measure of price increases, illustrating how the cost of goods and services changes over time. Although lower inflation indicates a slower rate of price growth, prices continue to rise. The ONS determines inflation based on a basket of goods and services that represent typical household expenditures. This headline inflation figure represents an average, with individual prices varying around this central value.