UK inflation has dipped to its lowest level in four months, offering a glimmer of hope for households and policymakers alike, even as food prices continue to climb and economic anxieties linger. According to the Office for National Statistics (ONS), the annual Consumer Prices Index (CPI) inflation rate fell to 3.6% in October 2025, down from 3.8% in September. This marks the lowest rate since June of this year and comes just a week before Chancellor Rachel Reeves is due to unveil a crucial Budget aimed at tackling the nation’s cost-of-living crisis and public finance shortfalls.
The latest figures, released on November 19, 2025, show that while inflation is cooling, it remains above the Bank of England’s 2% target. Economists had forecasted a slightly sharper drop to 3.5%, but nonetheless, the data has fueled expectations that the Bank of England will cut interest rates at its next meeting on December 18. The main downward pressure on inflation came from domestic energy bills, as the government’s energy price cap rose by just 2% in October—a far cry from the 9.6% increase a year earlier. Hotel prices also contributed to the decline, dropping more steeply than usual between summer and Christmas.
But it’s not all good news. Food prices, which had briefly eased in September, surged again in October. The ONS reported that the annual inflation rate for food and non-alcoholic drinks jumped to 4.9%, up from 4.5% the previous month. Staples such as bread, meat, fish, vegetables, chocolate, and confectionery all saw price increases, while fruit prices provided a rare bright spot by falling slightly. The Food and Drink Federation attributed the stubborn rise in food costs to higher ingredient and energy expenses, as well as regulatory costs like packaging taxes and increased National Insurance.
Chancellor Rachel Reeves responded to the inflation data with a mix of optimism and resolve. "I'm determined to do more to bring prices down," she said, acknowledging that "inflation and the cost of living is still a big burden on families across the country." Reeves emphasized that easing these pressures is a central goal of her upcoming Budget. She has signaled that the government will pursue a blend of tax rises and spending cuts to shore up public finances, while also taking "targeted action" to help those most affected by rising costs. "That's 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," Reeves stated, according to BBC and The Standard.
Grant Fitzner, the ONS’s chief economist, provided further insight into the drivers behind the latest inflation figures. "Inflation eased in October, driven mainly by gas and electricity prices, which increased less than this time last year following changes in the Ofgem energy price cap," he explained. Fitzner noted that hotel prices, which typically fall between summer and Christmas, dipped even more than usual this year. However, he cautioned that fuel prices have risen, impacting both drivers and the cost of deliveries. "The annual cost of raw materials for businesses continued to increase, while factory gate prices also rose," Fitzner added, highlighting ongoing inflationary pressures in the supply chain.
For many in the UK, the news of slowing inflation provided a sense of relief after months of relentless price increases. Sarah Coles, head of personal finance at Hargreaves Lansdown, captured the national mood: "If you're wondering what that warm breeze is, it's the entire country heaving a sigh of relief at the news that inflation has fallen for the first time since March." She pointed out that slower price rises could ease the pressure on households and also benefit mortgage borrowers if interest rates were to fall.
Political reactions to the inflation data have been predictably mixed. The opposition Conservatives were quick to criticize the Labour government, blaming it for stoking inflation through previous tax-raising budgets. Shadow chancellor Sir Mel Stride remarked, "Inflation has been above target every single month since Labour's last Budget, leaving working people worse off." Meanwhile, Liberal Democrat deputy leader Daisy Cooper urged the chancellor not to "look this small gift horse in the mouth" and called for "emergency measures to slash people's energy bills" as well as a VAT cut for the hospitality sector.
Economists are largely united in predicting that the Bank of England will move to cut interest rates in December, a move that could provide further relief to borrowers and stimulate economic growth. Rob Wood, chief UK economist at Pantheon Macroeconomics, said a December rate cut was now "nailed-on" but anticipated "a lengthy delay until another cut" after that. According to The Standard, experts believe that while headline inflation slowed a bit less than expected, mainly due to food prices, the overall trend points to a gradual easing of price pressures.
The Bank of England, for its part, has been cautious. At its last meeting on November 6, the Bank held its main interest rate at 4%, with a slim majority of policymakers seeking more information on the pace of inflation’s decline before backing another reduction in borrowing costs. Both core and services inflation, which strip out volatile components like food and energy, also eased in October, raising hopes that inflation may be on a downward trend. Nevertheless, the Bank’s inflation target remains at 2%, and as of October, inflation is still well above that level.
The timing of the inflation report is significant, coming just days before the government’s Budget announcement. Reeves is expected to outline measures that address both the multibillion-pound shortfall in public finances and the persistent cost-of-living pressures. Speculation has swirled around potential tax cuts on energy bills, spending reductions, and other fiscal measures that could influence inflation’s future trajectory. Economists, including Suren Thiru of the ICAEW, have noted that "the Budget is a last obstacle as rate-setters will want to gauge the effect of the policies announced before authorizing another rate reduction."
Looking ahead, the outlook for UK inflation and interest rates will depend on a complex mix of domestic policy decisions, global economic developments, and the ever-present specter of energy and commodity price volatility. For now, though, the latest data offers a rare moment of optimism for households, businesses, and policymakers alike, even as the nation braces for the tough choices and uncertainties that lie ahead.
