Inflation rate drops sharply to 4.6%

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Peninsula Team, Peninsula Team

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The inflation rate fell by more than 2% in October as last autumn’s high energy prices fell out of the calculations.

The Office for National Statistics (ONS) confirmed that inflation has fallen to 4.6% from 6.7% in September, down from 11.1% this time last year.

The rate of energy price rises fell to 6.9% between September and October, compared with 21% this time last year.

Food and drink prices were another factor influencing the significant drop with a fall from 12.1% to 10.1% on the month. Milk prices were down 5.3% while cheese, eggs and vegetable prices all fell. However, some products have shot up in price over the last year with sugar up 49.6% and olive oil up 50.2%, and sauces up by more than 20% meaning the price of an average shop is going to remain high. Beers (12%) and wines (15.3%) were up.

Petrol prices have risen slightly over the month by 1.5p to 155.1p per litre but are still cheaper than this time a year ago.

Deloitte have commented on today’s ONS figures: ‘The sharp fall in inflation in October is welcome news and significantly narrows the gap in price rises between the UK and its European peers. The continued easing in underlying price pressures, as evidenced by falling core and services inflation, is another positive development. Nonetheless, there is some way to go before inflation settles back to a pre-pandemic normal.

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‘Today's figures support the view among investors that the Bank of England's interest rate has already peaked. A further fall in inflation could bring forward market expectations for the timing of the first rate cut next year.’

Sarah Coles, head of personal finance, Hargreaves Lansdown said: ‘Inflation has tumbled to 4.6% - smashing the government’s target to halve by the end of the year and hitting its lowest point in two years. It’s still way above the Bank of England’s target of 2%, but it’s heading in the right direction. Unfortunately, we can’t get too excited, because it’s not going to be downhill all the way from here.’

Daniel Casali, chief investment strategist at Evelyn Partners said: ‘The downward trend in inflation is continuing apace. A year on from annual inflation of 11.1% in October 2022, the headline rate has since decelerated by 6.5% with much of that coming from lower energy prices in the transport fuel and household gas and electricity categories.’

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