UK inflation rate cools by more than expected
People shop at Borough Market in London, Britain July 19, 2023. REUTERS/Anna Gordon/File photo
LONDON -British inflation cooled by more than expected in October as household energy prices dropped from a year ago while stubbornly high services sector price growth also eased, offering some relief to the Bank of England and Prime Minister Rishi Sunak.
Annual consumer price inflation plunged to a lower-than-expected 4.6 percent in October from 6.7 percent in September, official data showed on Wednesday. The increase in consumer prices was the smallest in two years.
The Bank of England’s forecasts and the consensus from a Reuters poll of economists had pointed to a reading of 4.8 percent.
READ: Bank of England keep rates at 15-year high, rules out quick cuts
Sterling fell slightly against the dollar after publication of the data which showed key inflation measures watched closely by the BoE also falling by more than expected.
Core inflation, which strips out energy and food prices, fell to 5.7 percent from 6.1 percent, while service sector inflation also fell by more than the central bank had expected to 6.6 percent from 6.9 percent.
The data represented some rare welcome news for Sunak who promised to halve price growth this year before an expected 2024 election that opinion polls show his Conservative Party is likely to lose.
READ: UK inflation to be highest among big economies in 2023 – OECD
But BoE Chief Economist Huw Pill said on Tuesday that the expected fall in inflation to just under 5 percent would still leave it “much too high” even if it represented a more than halving in price growth over the past year.
The BoE has sought to stress that it is nowhere near cutting interest rates from their 15-year high, even as the economy flat-lines close to a recession.
“With headline inflation remaining significantly above target, today’s data are unlikely to shift the dial for the Bank of England, with interest rates expected to remain at their current level until the second half of next year,” Yael Selfin, chief economist at KPMG UK, said.
