Inflation falls to three-year low as energy prices fall


UK inflation succumb to at its lowest pace in almost three years last month as the vitality cap kept a lid on the price of electricity, gas and other fuels, according to official statistics.

The Establishment for National Statistics (ONS) said consumer prices rose 1.5% in October, against 1.7% in September.

Get-up-and-go regulator Ofgem lowered price caps last month.

The slower estimate of price rises could boost household spending power as wages are start faster than inflation.

ONS data released on Tuesday showed that customarily earnings, excluding bonuses, increased by 3.6% in the three months to September.

The October inflation integer was lower than the 1.6% forecast by economists, although the Bank of England has whispered inflation could slip to 1.25% early next year – very much below its 2% target.

A spokesperson for the ONS said: “A fall in utility tolls due to a lowering of the energy price cap helped ease inflation in October. In spite of that, this was partially offset by rising clothing prices.”

Prices of vestments and footwear rose by 1% on the previous month, the ONS said, with the most meaningful price moves being in ladies’ formal trousers and branded trainers.


Andrew Walker, BBC World Service economics correspondent

The Bank’s principles makers expect the decline in inflation to continue in the first half of next year, due partly to the bump of the energy price cap and a likely reduction in water bills.

But they have in mind those factors will fade and inflation will move treacherously towards the target in the latter part of 2020. So the October data doesn’t barest much change the argument about the next move in interest clips.

Two big uncertainties are perhaps more likely to move the dial: Brexit and the slowdown in the broad economy.

Indeed the Bank has already signalled as much. Persistent Brexit-related uncertainty and auxiliary weakness in global growth could mean it “might need to strengthen the expected recovery in UK GDP growth and inflation” – in other words cut interest classifications.

If those risks don’t materialise a rise would be more likely. But no removal is imminent.

Gas and electricity prices fell by 8.7% and 2.2% respectively in October from September.

Ofgem told that around 15 million households on default deals or pre-payment meters order see lower bills this winter as a result of its latest cap on prices which imitated effect from October.

The cap means that households should typically pay £75 insufficient a year.

Howard Archer, chief economic advisor to the EY Item Alliance, said the inflation figures were “decent news for consumer obtaining power”.

The 3.6% rise in wages in the three months to September make an analogy withs with an inflation rate of 1.8% over the period.

Jing Teow, economist at PwC, declared: “The continued trend of falling inflation since late 2017, coupled with the unfaltering rise in wages since 2018, has boosted household spending power, which has supported UK budgetary growth over the past two years.”

But she said there were donates that pay growth was “cooling off” since peaking in June this year, which puissance also put less pressure on firms to raise prices.

The inflation bawl out has implications for interest rates. Ruth Gregory, senior UK economist at Head Economics, said the falls in energy prices meant that the taste in inflation was not “a reflection of a weakening in underlying inflationary pressures”.

She expects a moreover fall in utility prices in April next year.

“Overall, the participates do little to change our view that inflation will spend myriad time below 2% than above it in 2020 and that if Brexit is hold up further, interest rates will be cut in May 2020,” she said.

Emma-Lou Montgomery, associate top banana for personal investing at Fidelity International, also said there could be pressing to cut in rates – currently at 0.75% – early in 2020.

But Samuel Tombs, chief UK economist at Pantheon Macroeconomics, believed the inflation measure should rise back to 2% in the second half of 2020 so he doubted that evaluates would be cut soon.

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