UK inflation slows in October as higher interest rates take effect

LONDON (ICIS)–The UK’s inflation rate in October fell by more than two percentage points from the previous month, continuing a downward trend as higher central bank interest rates take effect.

The Consumer Prices Index (CPI) rose by 4.6% in the 12 months to October, slowing from 6.7% in September, the Office for National Statistics (ONS) said on Wednesday.

Inflation has continued to fall throughout 2023 after peaking at 11.1% in October last year, as the Bank of England implemented a series of interest rate hikes.

Higher interest rates help to bring down inflation by limiting consumer spending power.

The largest contributory factor was from housing and household services, where the annual rate for CPI was the lowest since records began in January 1950, the ONS said, pointing to lower energy costs.

This was followed by food and non-alcoholic beverages, which had the lowest annual inflation rate since June 2022.

Despite the fall in energy and food costs, both remained high in comparison to previous years. For October 2023 compared to October 2021, the price of natural gas was around 60% higher, electricity was up 40% and food by around 30%.

Higher interest rates have also filtered through to the UK’s economy, with third-quarter GDP showing zero growth.