Consumer Prices Index CPI Inflation Falls to 3.6% pa

The Office for National Statistics (ONS) has this morning released UK inflation figures for October 2025.

After three consecutive months of inflation holding at 3.8% pa, it has finally fallen a little to 3.6% pa.  This is still 1.6%pa above the Bank of England’s target of 2.0% pa.

There is some cheer here for the Chancellor. Rachel Reeves as it should lessen the pressure on the Autumn Budget next week and give the Bank of England some room to cut rates on 18^th December 2025.  This should also give the Chancellor some more room as the cost of government borrowing costs and interest payments should fall. Given GDP ‘flatlining’ at 0.1%, although we suspect it is nearer 0%, we hope it gives Mrs Reeves room to stimulate the economy rather than squeeze it.

The old measure of inflation, Retail Prices Index (RPI) has fallen again but by 0.2% to 4.3% after September’s fall of 0.1% pa but it is still ‘day to day’ necessities such as education, alcohol, tobacco, housing costs, food, and non-alcoholic beverages that are ‘hammering’ our pockets.

Falls in Prices (largest falls 1st)

• Housing and household services down to 5.2%.
• Communication down to 4.3%,
• Restaurants and hotels down to 3.8%,
• Health down to 2.7%,
• Clothing and footwear down to 0.3%,
• Furniture and household goods down to 0.3%.

Rises in Prices (largest rises 1st)

• Education up to 7.6%,
• Alcohol and tobacco up to 5.9%,
• Food and non-alcoholic beverages up to 4.9%,
• Recreation and culture up to 2.9%,
• Miscellaneous goods and services up to 2.3%.

Transport remained level at 3.8%.

RPI Falls 0.2% pa to 4.3% pa

The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI) and still our preferred measure of real inflation has fallen for a third consecutive month so a small amount of joy here for both the Bank of England and the Chancellor.

Comment

We said last month and we repeat, the Bank of England is ‘walking a tightrope’.  The Chancellor is already ‘on the ropes’ and they are swaying.  Holding interest rates and then the Chancellor moving away from income tax rises for all, has made the cost of government borrowing.  Huge tax rises are expected in the Budget and without economic stimulus, recession may be unavoidable.  We do expect interest rates to be cut next month.

Key dates for us all:

• 26 November 2025: Autumn Budget.
• 17 December 2025: Next ONS inflation report.
• 18 December 2025: Next Bank of England MPC interest rate decision.