Inflation in Britain slowed more than expected in October as household energy prices fell compared to a year earlier and there was also a broader easing of price pressures, giving relief to the Bank of England and Prime Minister Rishi Sunak.
Annual consumer inflation eased to 4.6%, lower than expected, from 6.7% in September, according to official data released on Wednesday. The increase was the smallest in two years and prompted investors to increase their bets on a rate cut by the Bank of England next year.
Finance Minister Jeremy Hunt is expected to offer investment incentives to businesses in the budget update on November 22.
BoE expectations and the consensus from a Reuters poll of economists had expected an October reading of 4.8%. The ONS noted that the fall in the annual CPI rate was the biggest month-on-month since April 1992.
Sterling eased slightly against the US dollar after the data was released, which showed core inflation slowed more than expected. The FTSE 100 rose more than 1% to its highest level in almost a month. The FTSE 250 index also hit a two-month high.
Although inflation has more than halved from its peak in October 2022, the BoE has warned that the "last step" to reduce it will be more difficult. The central bank predicts that inflation will only return to the 2% target by the end of 2025, although many economists say it will happen sooner.
With Britain's economy now stagnant, inflation figures bring an expected indication that the BoE's rate hike cycle has ended, with the US Federal Reserve and the European Central Bank also appearing to have set rates at peak levels.
Despite a significant drop in inflation last month, Britain still maintained the highest rate of consumer price growth among the G7, slightly above France's 4.5%. Italy is scheduled to publish its latest estimates for October later this Wednesday.
