Hard-pressed Brits have been handed some relief after inflation dropped faster than expected last month – bringing the prospect of lower interest rates closer.
Headline CPI tumbled to 4.6 per cent in October, from 6.7 per cent in September and better than the 4.8 per cent analysts had pencilled in.
Although prices are still rising more than twice as fast as the Bank of England’s target and the economy has been flatlining, Rishi Sunak and Chancellor Jeremy Hunt said they had ‘delivered’ on a vow to halve the rate this year.
The figures will solidify views that interest rates have peaked, with markets betting the BoE will start easing them down in the first half of next year.
They could also boost Tory calls for Mr Hunt to bring forward tax cuts in the Autumn Statement next week, after he previously resisted on the basis they could fuel inflation.
There is speculation Mr Hunt could add around £2billion to his warchest by using the latest month’s CPI to uprate benefits, rather than the higher level from September.
The Office for National Statistics (ONS) said the largest driver of the slowdown came from house prices, which saw the lowest CPI rate since records began in 1950.
Mr Sunak said: ‘In January I made halving inflation this year my top priority. I did that because it is, without a doubt, the best way to ease the cost of living and give families financial security.
‘Today, we have delivered on that pledge.’
Headline CPI tumbled to 4.6 per cent in October, from 6.7 per cent in September and better than the 4.8 per cent analysts had pencilled in
Prime Minister Rishi Sunak (pictured) said his pledge to halve inflation by the end of the year has been ‘delivered’
Consumer Prices Index inflation was 4.6% in October, down from 6.7 per cent in September, according to data from the Office for National Statistics (ONS )
Mr Sunak had pledged to halve inflation to about 5.3 per cent by the end of the year.
The PM said ‘hard decisions and fiscal discipline’ by his Government had contributed to the reduction.
‘Inflation works like a tax. It eats into the pound in your pocket, affecting the price of your food shop, your mortgage, the size of your pension pot,’ the Prime Minister said.
‘This is why halving inflation has been my number one priority.
‘Getting it down has involved hard decisions and fiscal discipline.
‘Official figures released this morning confirm we have halved inflation, meeting the first of the five priorities I set out at the beginning of this year.
‘While it is welcome news that prices are no longer rising as quickly, we know many people are continuing to struggle, which is why we must stay the course to continue to get inflation all the way back down to 2%.’
Mr Hunt reposted a statement put out by the Treasury which said: ‘In January we said we’d halve inflation. Today we’ve done that – inflation is now 4.6%.
‘Why does that matter?
‘Because it means people keeping more of what they earn, letting them provide for their families, do the things they love and invest in their futures.’
Grant Fitzner, chief economist at the Office for National Statistics (ONS), said: ‘Inflation fell substantially on the month as last year’s steep rise in energy costs has been followed by a small reduction in the energy price cap this year.
‘Food prices were little changed on the month, after rising this time last year, while hotel prices fell, both helping to push inflation to its lowest rate for two years.’
The sharp drop in inflation will be be welcomed by Brits who are struggling with the cost of living
Shadow chancellor Rachel Reeves said the Government should not be ‘popping Champagne corks’ about the fall in the rate of inflation, with people still struggling with the cost of living.
‘The fall in inflation will come as some relief for families struggling with the cost of living,’ she said.
‘But now is not the time for Conservative ministers to be popping champagne corks and patting themselves on the back.
‘After 13 years of economic failure under the Conservatives, working people are worse off with higher mortgage bills, prices still rising in the shops and inflation twice as high as the Bank of England’s target.
‘Rishi Sunak is too out of touch and his party is too divided to help people who are worried about the cost of living.
‘A Labour government’s priority would be making working people better off by boosting wages, cutting people’s bills and getting the economy growing again.’
Liberal Democrat Treasury spokeswoman Sarah Olney echoed Labour’s view, saying: ‘Rishi Sunak congratulating himself over today’s figures will be cold comfort for all the hard-working people still bearing the brunt of this Conservative chaos.
‘For months on end, people across the country have been watching as their pay cheque gets squeezed from all sides, draining every spare penny. From the ever-increasing cost of the weekly shop to skyrocketing mortgage payments.
‘Enough is enough. With next week’s autumn statement, the Government must properly help families and pensioners struggling with the cost-of-living crisis and give our NHS the funding it desperately needs.’
But Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said that a ‘dramatic drop dramatic drop suggests that the UK has turned the corner in its battle against soaring inflation’.
Mr Thiru added: ‘While the Prime Minister has achieved his target to halve inflation this year, this owes more to the downward pressure on prices from falling energy costs and rising interest rates than any Government action.
‘Although subsequent declines will be more modest, the drag on demand from a softening jobs market and high interest rates may mean that inflation falls back to the Bank of England’s 2% target more quickly than they currently expect.
‘This fall in inflation seals the deal on a December interest rate hold and may drive a three-way voting split among rate setters with a member voting for a rate cut as concerns over a flatlining economy grow.’