By Ed Frankl


The U.K.'s inflation rate fell to its lowest rate in two years in October, dragged down by falling energy prices, lifting a little of the pressure on the Bank of England's efforts to combat rising prices ahead of its final meeting of the year next month.

The consumer price index--which measures a wide basket of goods and services prices--rose 4.6% on year, falling from 6.7% in September, data from the Office for National Statistics showed Wednesday. That marks its lowest rate since October 2021.

October's rate was slightly lower than expected by economists, according to a poll compiled by The Wall Street Journal, who expected inflation at 4.7%. The 2.1 percentage-point decline from September to October marked the largest fall in the rate since 1992.

That will please some at the BOE, especially as the central bank said earlier in November it expected CPI inflation to average at 4.6% in the fourth quarter as a whole.

Indeed, the result will fuel expectations in some parts that the bank will cut interest rates by the middle of next year, according to Paul Dales, chief U.K. economist at Capital Economics, in a note. The BOE held its key rate at 5.25% at its latest meeting.

The result also means Prime Minister Rishi Sunak met one of his key pledges in halving inflation within 2023 a month early. The rate has fallen significantly from a recent high of 11.1% in October 2022.

The fall in the headline rate was driven by electricity and gas prices, were down 22% on year in October, compared with a rise of 5.0% in September, a result of an energy price cap introduced at the start of October. Wholesale energy prices sky-rocketed last year as a result of Russia's invasion of Ukraine.

Meanwhile, food prices rose 10.1% on year in October, down from 12.3% in September, with dairy and vegetables marking the largest decline in rising prices.

However, core inflation, which strips out the volatile changes in energy and food prices and reflects underlying inflationary pressures, remains higher than the headline rate at 5.7% on year in October, creeping down from 6.1% in September.

That could continue to pressure wage growth, which, while easing, remains elevated, a further sign that while inflation has fallen considerably in the past year, there may be a continued struggle in finally reaching the BOE's 2% inflation target.


Write to Ed Frankl at edward.frankl@wsj.com


(END) Dow Jones Newswires

11-15-23 0321ET