UK inflation falls to 2.2% in October

Lorries parked on the M20 in Kent The ONS says transport costs have been falling

The UK's inflation rate, as measured by the consumer prices index (CPI), fell to 2.2% in October from 2.7% the month before.

The surprise fall saw CPI inflation drop to its lowest rate for more than a year, and eases pressure on the Bank of England to raise interest rates.

The figure was below forecasts of 2.5% and is the lowest since September 2012.

The Office for National Statistics said the fall was driven by the biggest drop in transport prices since July 2009.

It said transport prices fell by 1.5% between September and October.

One major transport cost factor came from fuel price cuts at many major supermarket chains engaged in a price war.

There were also downwards price movements on some air fares.

Inflation target

Another inflation fall came in education costs, with the impact of rising tuition fees being smaller than at the same time a year previously.

And food inflation fell too, from 4.8% to 4.3%.

"Falling petrol and diesel prices seem to have done the most to drag the inflation rate down, and the ongoing softness in Brent crude prices means there may be a little more of this to come in the months ahead," said economist Rob Carnell at ING.

"There was also some price softness in furniture and household items too."

A separate measure of inflation, the retail prices index (RPI), fell from 3.2% in September to 2.6% in October.

The drop in the inflation rate means the Bank of England is considerably closer to its inflation target of 2%, which it has exceeded since December 2009.

However, recently announced price rises by most of the UK's large energy firms have yet to take effect and will have an inflationary impact in the coming months.

The Bank will publish its latest inflation forecast on Wednesday.

"The Bank of England's forward guidance states that a hike in interest will not be considered until unemployment drops below 7%," said economist Chris Williamson at Markit.

He said the Bank's forecast was likely to "bring forward when the Bank expects this to happen from late 2016 to perhaps late 2015, given the recent flow of stronger than expected economic data".

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

BBC Business Live

  1.  
    CAPITA EARNINGS 07:10:

    Capita says "underlying" profit before tax for the first six months of the year rose 16% to £238m. However, if you factor in things like acquisition costs and reductions in the value of its assets, it's a drop in profit to £152.3m from £157.5m. Still, dividend is up 10.3% to 9.6 p.

     
  2.  
    RUSSIAN SANCTIONS 06:51: BBC Radio 4
    Vladimir Putin

    More from Mr Grodzki on Russian sanctions: He says the Russian economy is very resilient to sanctions and Russia is virtually self-sufficient. It can sell its oil elsewhere in the world - it recently signed a deal with China - and he says France cancelling defence contracts may even boost the Russian economy and Russian jobs.

     
  3.  
    RUSSIAN SANCTIONS 06:41: BBC Radio 4

    Georg Grodzki has now popped up on the Today programme, again talking about sanctions against Russia. He says: "It's very difficult to impose sanctions on a country that needs healthy relations with the West less than the West needs healthy relations with it." He adds Russian can buys the goods they want to from elsewhere. They would prefer to buy goods from the West but if they can't, they will live with it, he says.

     
  4.  
    RUSSIAN BONDS 06:33: Radio 5 live

    Russia cancelled one of its weekly bond sales yesterday, its first in three months, citing "unfavourable market conditions." On 5 live we have Georg Grodzki, formerly of Legal & General, telling us why. Sometimes governments realise they don't need the money he says, but this time that isn't the case. Russia's borrowing costs, which are about 4.6% for five year bonds - already high - have only got worse in recent days, he says.

     
  5.  
    TAX 06:23: Radio 5 live

    "Everyone should pay taxes at a flat rate from the first dollar," says Arthur Laffer, a former adviser to Ronald Reagan on 5 live. People like to avoid tax, he says, and taxing everyone the same should help stop gaming the system, he says. Does that mean taxing the poor the same? Yes, he says. Do you reward tax dodgers then? "They pay the tax rather than doing the dodges," he says.

     
  6.  
    ROYAL MAIL 06:11: Radio 5 live

    James Bevan of CCLA Investment Management is back on 5 live talking this time about Royal Mail's performance. Their annual shareholder meeting is on Thursday and he wants to hear more about the French antitrust case they, TNT and FedEx are involved in. Royal Mail has received notice from French competition authorities over a possible breach of antitrust law by one of its subsidiaries, which could result in a fine for the recently privatised group.

     
  7.  
    TESCO SHARES 06:01: Radio 5 live

    Tesco shares were down yesterday, but when it was announced they were losing their chief executive, the shares rose. How come? James Bevan, chief investment officer at CCLA Investment Management is explaining what he thinks on 5 live. "When Philip Clarke was let go there was also a profit warning," he says. "For that to drive the share price up seemed absolutely mad."

     
  8.  
    06:00: Howard Mustoe Business reporter

    Hello! You can, as ever, get in touch with your views and experiences via email bizlivepage@bbc.co.uk and via twitter @BBCBusiness.

     
  9.  
    06:00: Matthew West Business Reporter

    Good morning everyone. We've had Microsoft second quarter earnings overnight - they were bad - as well as Apple - good- flights into Israel have been halted and there's a row over Russian sanctions to contend with. the morning is only just getting started.

     

Features

From BBC Capital

Programmes

  • (File photo) Usain BoltClick Watch

    Challenging the world's fastest man to a virtual race over 40m – can you keep up?

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.