UK inflation eased to 3.6% in the year to October, down from September’s 3.8% reading, increasing the chances of a Bank of England interest rate cut next month.
The core inflation measure, which strips out volatile food and energy prices, fell to 3.4% over the 12-month period. This represented a decline from September’s 3.5% and came in below market expectations of 3.7%.
Month-on-month inflation rose to 0.4%, after remaining flat in September.
“After seven months of stubborn price growth, UK inflation finally eased to 3.6% in October, its lowest since June,” said Lale Akoner, global market analyst at eToro.
“The slowdown, which is driven by softer energy bills and easing services inflation, raises expectations that the Bank of England could deliver a pre-Christmas rate cut. While inflation remains above target, momentum is clearly cooling as wage growth softens, and the jobs market weakens.
“A credible budget next week that reins in inflation without stifling growth could anchor market confidence and pave the way for gradual monetary easing. For retail investors, this backdrop favours high-quality bonds and dividend-paying equities, which stand to benefit from lower yields. Real assets like infrastructure and REITs may also regain appeal as policy shifts. The prudent stance: stay diversified, favour income and quality, and avoid overreacting to short-term fiscal noise.”