Ahead of Autumn Budget
UK inflation rose by 3.6% in the 12 months to October 2025, down from 3.8% in September, strengthening the case for a further rate cut from the Bank of England next month.
On a monthly basis, the Consumer Prices index (CPI) rose by 0.4% in October 2025, compared to a jump of 0.6% during the same month a year prior, according to data from the Office for National Statistics (ONS).
This drop in inflation was in line with expectations of economists polled by Reuters.
Easing CPI was driven primarily by gas and electricity prices, which jumped by less than the same time last year. The costs of hotels also fell, but food prices rose slightly.
Professionals noted that the data will be welcomed by rate setters at the Bank of England and Chancellor Rachel Reeves ahead of her Autumn Budget next week (26 November).
Reeves said today’s (19 November) lower inflation reading was “good news” but added that she is “determined to do more to bring prices down”.
“That is why at the Budget next week, I will take the fair choices to deliver on the public’s priorities to cut NHS waiting lists, cut national debt and cut the cost of living,” she added.
However, Lindsay James, investment strategist at Quilter, warned that “although the direction of travel is improving, the wider economic backdrop remains fragile”.
“Growth has been subdued all year, and the labour market is now cooling at a faster pace. The economy is clearly at a point of significant risk as we move towards 2026,” she said.
Evelyn Partners chief investment strategist Daniel Casali also cautioned that, despite the fall in CPI, labour market conditions have been weakening, with unemployment at 5% and job vacancies declining.
“Adding to this disinflationary backdrop, the upcoming Budget will include higher taxes, which will reduce household disposable income and dampen demand,” Casali said.
Linus Uhlig Professional Adviser