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  • Writer's pictureDenver Capital

UK inflation slows sharply to 4.6%.



In October, the UK experienced a notable drop in inflation, hitting its lowest point in two years, primarily due to a decrease in energy expenses. Consumer price increases fell to 4.6% from the previous month's 6.7%, meeting the government's goal of halving inflation ahead of schedule.


However, attributing this decline solely to governmental actions requires a more nuanced perspective, considering the influence of stabilising energy costs. Economists emphasise that the significant decrease from October 2022's peak of 11.1% is largely tied to this month's reduction in the energy price cap, dictating the maximum charges for energy supplied.


The Bank of England's decision to raise interest rates to 5.25%, the highest in 15 years, aims to manage demand in the UK economy and control price surges. While this hike positively impacts mortgage expenses, it also results in higher savings rates.


Despite indications of a softened cost of living, many households might not immediately experience relief, especially concerning energy bills. Despite lower gas and electricity prices compared to the previous year, most households are likely to encounter higher energy expenses this winter due to the absence of government bill support.


A decline in inflation doesn't necessarily translate to reduced prices for most goods and services; rather, it signifies a slower pace of price hikes. Predictions had already hinted at a decrease in the inflation rate when Rishi Sunak aimed to halve inflation by year-end.


The Prime Minister and Chancellor Jeremy Hunt emphasised the significance of this commitment, requiring tough decisions and fiscal discipline. They underscored the government's efforts to support employment without resorting to additional borrowing.


Despite October's decline, the UK still falls short of meeting the Bank of England's 2% inflation target. The ONS highlighted that energy and food prices remain higher compared to two years ago, and the announcement of next year's energy price cap might signal another increase in energy expenses.


Moreover, UK inflation persists above rates observed in other countries like the US, France, and Germany, indicating ongoing economic disparities.

 

IMPORTANT: This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualised advice from a qualified professional.



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