UK Inflation Data and Economic Outlook for October
Inflation data for the UK in October is due at 07:00, with the last 12-month Consumer Price Index (CPI) recorded at 3.8%. Analysts expect this to ease slightly to between 3.5% and 3.6% for the 12 months to October. According to forecasts from the Bank of England, the 2% inflation target may not be met until early 2027. A rate cut in December is considered likely, though forthcoming data could change this outlook.
Inflation drivers include lower energy price cap effects year-on-year, weaker airfares, and influences from prices of meat and chocolate. Despite some reductions, energy costs remain a contributor to overall inflation. The chancellor's first budget has been criticised by business groups and economists for pushing up costs since April, with firms passing increased expenses on to consumers.
Labor market and growth data indicate a rise in unemployment to 5%, along with slowing wage growth. The UK economy expanded by 0.1% in the third quarter. The Bank Rate was maintained at 4% following a 5-4 vote by the Monetary Policy Committee, leaving open the possibility of a rate cut in December.
Predictions from Cornwall Insight suggest the energy price cap will fall by about 1% for the January to March period, with the average dual-fuel bill around £1,755. However, potential effects from levies and VAT may influence the overall cost.
Overall, inflation is expected to ease gradually in the coming months, although there are risks to the outlook including global shocks and potential budget-related measures.
