UK inflation has fallen for the first time in three months, dropping from 3.8% to 3.6% in October, according to official figures. The decline is seen as a turning point after a volatile year of rising prices, with economists expecting further easing.
Chancellor Rachel Reeves has hinted that next week's budget will include measures to accelerate the fall in prices. A cut in the 5% VAT rate on energy is a leading contender, alongside a competition crackdown on dentistry and veterinary businesses, which have been accused of monopoly pricing.
The Bank of England is under pressure to reduce interest rates from the current 4% level. Financial markets now see an 82% chance of a cut at the next Monetary Policy Committee meeting in December, though policymakers remain divided. Chief economist Huw Pill warned that high wages could still fuel inflation, while MPC member Swati Dhingra signalled support for a reduction.
Governor Andrew Bailey, who wielded the casting vote to hold rates earlier this month, could be swayed by further favourable inflation data due before the December meeting. The chancellor's budget measures may also make a rate cut more likely.
