According to the results of October, the annual inflation rate in the UK showed a sharp decline to the level of 4.6%.
This inflation rate is the lowest in the last two years. Experts say that the October dynamic of this indicator is due to factors such as a decrease in the cost of gas and cheaper electricity.
Special attention should be paid to the fact that the decrease in the inflation rate is not evidence of a drop in consumer prices. Experts note that the current inflationary dynamic signals that the growth in the cost of goods and services has become less intense.
There is an opinion that the mentioned October result will ease concerns that the Bank of England will once again decide to raise interest rates by the end of this year, which have more than doubled the target of 2%.
The inflation rate recorded last month signals that British Prime Minister Rishi Sunak has achieved his goal of halving the corresponding indicator in 2023. The corresponding intention was announced in January. In the last quarter of 2022, the average inflation rate in the United Kingdom was 10.7%.
Rishi Sunak has already stated that he has fulfilled his January promise. At the same time, the Labour said that the British government should refrain from celebrating the change in the dynamics of the economy after two years of rising prices, which has become a heavy burden for workers faced with such external circumstances as higher mortgage bills, an increase in the cost of goods in stores and an inflation rate significantly exceeding the target of the Bank of England.
Suren Thiru, Director of Economics at the Institute of Chartered Accountants of England and Wales, says that the October result indicates that the UK has succeeded in fighting inflation, but this is mainly due to a decrease in pressure on prices against the background of cheaper energy and rising interest rates, and not the result of some actions of the country’s leadership. He believes that the subsequent decline in the inflation rate will be more modest. In his opinion, a decrease in demand against the background of a weakening labor market and high-interest rates may mean that the level of growth in the cost of goods and services will return to the target value of the Bank of England earlier than the financial regulator expects. He also said that the reduction in inflation strengthens the deal to maintain the interest rate in December.
The Chancellor Jeremy Hunt says that the British government could take advantage of some credit after several very difficult decisions to control borrowing and debt to limit spending in the economic system and reduce pressure on prices.
British media reported that the Chancellor may attempt to save up to 1 billion pounds by using lower inflation rates to increase working-age benefits in April next year. Charities said that this decision would not be justified and would entail financial difficulties for families in a difficult situation.
Food inflation in the United Kingdom in October was 10.1%. In September, this figure was 12.2%. In March, food inflation was equal to 19.2%. This figure was the highest in more than 45 years.
As we have reported earlier, Bank of England Warns of Zero Growth in British Economy Until 2025.