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\t\tRachel Reeves will take a close look at inflation data. Justin Tallis\/PA Wire\t<\/p>\n\t\t\tWednesday 19 November 2025 7:26 am
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\t\t\tWednesday 19 November 2025 7:27 am\n\t<\/p>\n
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\t\tRachel Reeves will take a close look at inflation data. Justin Tallis\/PA Wire\t<\/p>\n
Inflation hit 3.6 per cent in the year to October, it has been revealed, in the last set of prices data Chancellor Rachel Reeves will see before a crucial Budget<\/a> focused on curbing the cost of living.<\/p>\n The Office for National Statistics (ONS) said inflation cooled slightly from last month\u2019s figure of 3.8 per cent, but came in slightly higher than some economists had predicted.<\/p>\n Statisticians at the body also recorded services inflation to have lowered slightly to 4.5 per cent, a measure closely monitored by policymakers at the Bank of England.<\/p>\n Core inflation, which strips volatile items such as energy and food, rose by 3.4 per cent.<\/p>\n \u201cInflation eased in October, driven mainly by gas and electricity prices, which increased less than this time last year following changes in the Ofgem energy price cap,\u201d Grant Fitzner, chief economist at the ONS, said. <\/p>\n \u201cThe annual cost of raw materials for businesses continued to increase, while factory gate prices also rose.\u201d<\/p>\n Fitzner added that hotel prices were a downward driver on price growth.<\/p>\n<\/p>\n The latest set of data is unlikely to ease tensions in the Treasury ahead of the Budget. <\/p>\n Reeves has said lowering the cost of living would be a central objective when she announces a sweep of new tax and spending policies next week. <\/p>\n The mission underpinning her Budget could lead to a reduction in borrowing costs for the government, which are currently forecast to exceed \u00a3110bn this year. <\/p>\n A drive to lower inflation through a sweep of measures that either boost productivity in the UK economy or controversially dampen demand<\/a> levels through extra taxes on households could prompt Bank of England policymakers to vote for further interest rate cuts in the next year. <\/p>\n Lower interest rates<\/a> would result in a fall on regular payments to the government\u2019s lenders in the bond markets, lessening the strain on public finances. <\/p>\n Schroders\u2019 senior economist George Brown said further rate cuts would hinge on Budget decisions to lower bills. <\/p>\n \u201cAny further rate cuts will largely depend on the contents of the Chancellor\u2019s red box,\u201d Brown said.<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tUniversity tuition fee hike to prop up high inflation\u00a0<\/a><\/p>\n \u201cWage growth is still well above a target-consistent pace, especially given repeatedly weak productivity. The Bank must tread carefully given the heightened risk that high inflation becomes entrenched.\u201d<\/p>\n The cost of living was also voters\u2019 top issue in the latest set of polling published by City AM\/Freshwater Strategy. <\/p>\n Reeves\u2019 bid to tackle inflation <\/p>\n One way Reeves is expected to lower inflation at the Budget is to strip VAT from energy bills, which Barclays analysts said could skim 0.15 percentage points off headline inflation. <\/p>\n It could cost around \u00a32.5bn, widening the \u00a320bn fiscal hole which the Chancellor faces having to fill with spending cuts and tax rises. <\/p>\n