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Economics
19 November 2025
Economics
21 November 2025
Society and Culture
Commenting on today’s inflation figures, Julian Jessop, Economics Fellow at the free market think tank the Institute of Economic Affairs, said:
“Inflation is heading in the right direction again, but it is far too soon to sound the all clear.
“The fall in the CPI measure to 3.6% in October, from 3.8%, was widely expected. However, inflation is still well above the Bank of England’s 2% target.
“Moreover, there is still a worryingly large gap between inflation in the UK and in the euro area (where it is expected to be 2.1% in October). This gap can mostly be explained by Government policy choices, including the large increases in labour and other business costs since last Autumn’s Budget.
“The breakdown of the latest data also shows that UK inflation is still sticky. The fall in the annual headline rate can be entirely accounted for by the favourable base effects in domestic energy inflation. Bills still rose, but by less than in the same month last year.
“These bills are included in “housing and household services”, where the annual inflation rate remains high (at 5.2%).
“Otherwise, not much changed – although there was an unwelcome pick up in food inflation (from 4.5% to 4.9%).
“The core measure (excluding food and inflation) did at least tick down to 3.4%. But overall, there is little here to change anybody’s mind about the outlook for inflation. As such, today’s data will have no impact on the decisions in next week’s Budget.
“The fall in inflation was at least in line with the Bank of England’s forecasts, removing one barrier to an interest rate cut next month. However, the main reason why interest rates are likely to fall further is the weakness of economic activity, which is likely to be compounded by the announcement of even more tax increases next Wednesday.”
“Inflation is heading in the right direction again, but it is far too soon to sound the all clear.
“The fall in the CPI measure to 3.6% in October, from 3.8%, was widely expected. However, inflation is still well above the Bank of England’s 2% target.
“Moreover, there is still a worryingly large gap between inflation in the UK and in the euro area (where it is expected to be 2.1% in October). This gap can mostly be explained by Government policy choices, including the large increases in labour and other business costs since last Autumn’s Budget.
“The breakdown of the latest data also shows that UK inflation is still sticky. The fall in the annual headline rate can be entirely accounted for by the favourable base effects in domestic energy inflation. Bills still rose, but by less than in the same month last year.
“These bills are included in “housing and household services”, where the annual inflation rate remains high (at 5.2%).
“Otherwise, not much changed – although there was an unwelcome pick up in food inflation (from 4.5% to 4.9%).
“The core measure (excluding food and inflation) did at least tick down to 3.4%. But overall, there is little here to change anybody’s mind about the outlook for inflation. As such, today’s data will have no impact on the decisions in next week’s Budget.
“The fall in inflation was at least in line with the Bank of England’s forecasts, removing one barrier to an interest rate cut next month. However, the main reason why interest rates are likely to fall further is the weakness of economic activity, which is likely to be compounded by the announcement of even more tax increases next Wednesday.”
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