U.K. Inflation Slows to 4.6 Percent, Lowest in Two Years

The News

Inflation in Britain slowed last month, bringing the rate to its lowest level in two years, in a welcome easing of stubborn price pressures. Consumer prices rose 4.6 percent in October from a year earlier, the Office for National Statistics said on Wednesday, down from 6.7 percent in the previous month.

Digging Deeper: Lower energy bills are driving down inflation.

Last year, Russia’s invasion of Ukraine made wholesale energy prices soar, but price caps on bills in Britain meant that households felt these increases with a lag. The same has been true as wholesale prices have dropped this year.

In October, the inflation rate was pulled down by a drop in household energy costs as the cap — set every three months by the energy regulator — was lowered. The average household bill was set to 1,834 pounds ($2,293) per year, 7 percent lower than before. A year ago, overall inflation hit a peak of more than 11 percent on a jump in household energy costs, even after the government intervened to subsidize these payments.

Food inflation, which had taken over from energy as the main driver of inflation in recent months, also slowed in October. Food prices rose 10.1 percent, the slowest pace since June 2022.

Even as policymakers draw comfort from slowing headline inflation, they are carefully watching other measures of domestic price pressures to see how persistent inflation might be. These are falling more slowly. For example, officials look at core inflation, a measure that excludes food and energy prices, because they can be volatile and heavily influenced by international financial markets. Last month, core inflation eased to 5.7 percent, down slightly from 6.1 percent in September.

Policymakers also track wage growth, one of the stickier aspects of inflation. Price growth in the services sector, which is heavily influenced by companies’ wage costs, slowed to 6.6 percent. Data published on Tuesday showed that wage growth had slowed in the third quarter, but at a 7.7 percent annual pace, it was still near historical highs.

Why it Matters: The government meets its promise to halve inflation.