Inflation in the UK has seen a significant drop in October, reaching its lowest level in two years, according to official figures released by the Office for National Statistics. The decline in inflation is largely attributed to the exclusion of last year’s sharp rise in domestic energy bills from the annual comparison. Consumer prices in October were reported to be 4.6% higher than the previous year, a notable decrease from the 6.7% recorded the month prior.
Prime Minister Rishi Sunak had pledged to cut inflation in half this year, a promise he made shortly after assuming office when inflation stood at over 10%. With the latest figures, the Prime Minister stated that his commitment had been fulfilled, emphasizing the positive impact the reduction in inflation would have on the cost of living and financial stability for families. Sunak noted, “Today, we have delivered on that pledge.”
While the government can find reassurance in the decline of inflation, it is crucial to understand that the primary reason behind this reduction is the substantial interest rate increases by the Bank of England. The bank is responsible for maintaining a target inflation rate of 2%. Earlier this month, the Bank of England opted to keep its main interest rate unchanged at 5.25%, which is the highest level seen in 15 years. Additionally, the bank hinted that borrowing costs would likely remain elevated for an extended period.
Similar to other central banks, the Bank of England raised interest rates significantly from near-zero levels to counter price hikes initially caused by supply chain disruptions during the COVID-19 pandemic and later exacerbated by Russia’s full-scale invasion of Ukraine. These events led to increased food and energy costs. The worldwide approach of implementing higher interest rates, which aims to cool down economies by making borrowing more expensive and curbing spending, has contributed to the decline in inflation globally.
It is important to note that the UK economy experienced stagnation in the third quarter of this year, as official figures revealed, ahead of the government’s budget statement expected later this month. The current inflation data, indicating a drop to the lowest level in two years, will likely have an impact on the government’s economic policies moving forward.
Overall, the latest inflation figures present a positive development for the UK economy. While Prime Minister Rishi Sunak can claim success in meeting his inflation reduction pledge, it is crucial to recognize that the Bank of England’s interest rate hikes played a significant role in driving down inflation. As the UK awaits the government’s budget statement, these figures will undoubtedly inform economic policies and decisions aimed at maintaining stability and addressing the cost of living for families across the country.
More detail via Daily Mail Online here… ( Image via Daily Mail Online )