The rate of inflation fell sharply to 4.6% in the 12 months to October, the lowest rate in two years, achieving the Government’s pledge to halve inflation by the end of the year.
Largely due to a drop in energy prices, it follows sticky figures last month where inflation failed to drop as expected, making for an annual rate of 6.7%.
Meanwhile core inflation, which takes out volatile factors like energy, food, alcohol and tobacco to give a clear picture of underlying trends, though falling is still stubbornly high at 5.7% for the 12 months to October, down from 6.1% in September.
Alpesh Paleja, CBI lead economist, said: “A big drop in inflation was always expected in October, with last year’s energy price cap rise falling out of the annual comparison. But even taking this into account, inflation is heading in the right direction and the Government’s pledge to halve inflation by the end of the year has been met.
“Inflation should continue to fall in the months ahead. But the decline is set to be slow, and the CPI rate is likely to remain above the Bank of England’s target for much of next year. It’s worth noting that domestic price pressures remain sticky, and uncertainty over labour market data makes it difficult to gauge how much this is adding to inflationary pressure.
“Nonetheless, we’ve likely reached the peak of rising interest rates, and many are expecting the Bank of England to cut rates at some point next year. But with inflation set to fall slowly and the Bank of England being clear in their ‘higher for longer’ message, businesses and consumers shouldn’t expect a significant reduction in rates anytime soon.”