UK inflation rate falls to the lowest level in two years

UK inflation tumbled to the lowest level in two years as energy prices fell, bringing relief to consumers and giving Prime Minister Rishi Sunak the opportunity to declare victory on his pledge to cut price growth in half.

Consumer prices rose 4.6 per cent from a year earlier in October, down sharply from 6.7 per cent in September and the slowest pace since 2021, the Office for National Statistics said Wednesday.

The figures provide Sunak a boost ahead of a general election widely expected next year after he made halving inflation in 2023 one of his key five pledges. Inflation, which hit 10.7 per cent in the final quarter of last year, is now at its lowest since 2021 and forecast to decline further.

The slowdown will also strengthen expectations that the Bank of England is finished raising rates after lifting benchmark borrowing costs from 0.1 per cent to 5.25 per cent in less than two years in a bid to tame inflation.

There is similar speculation in the US, where traders on Tuesday erased bets on more rates hikes by the Federal Reserve after figures showing that inflation broadly slowed. After a record tightening spree, the European Central Bank has also probably reached peak rates as price pressures subside.

The pound slipped after the release showed inflation slowed more than expected. It traded as much as 0.2 per cent weaker at $1.2469.