Interactive Investor

UK inflation falls sharply

The light at the end of the cost-of-living tunnel is shining brighter, but challenges remain.

15th November 2023 07:46

Myron Jobson from interactive investor

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The significant fall in headline inflation compared to last month’s reading might come as a shock – albeit a welcome one. It is important to remember that the raw inflation figure reported through the Consumer Price Index illustrates the rise in prices from where they were a year ago.

“Inflation peaked at 11.1% last October, a 41-year high, largely driven by rises in energy and food prices in the fall-out of Russia’s invasion of Ukraine, which resulted in supply chain bottlenecks. The inflationary pressures from food and energy have since eased considerably.

“Crucially, the core inflation rate, the pared-down measure which excludes volatile food and energy prices, decelerated further to 5.7% in October from 6.1%. This reading matters because Bank of England policymakers monitor it to get a sense of inflation’s momentum. This reading adds to convictions that the interest rate cycle may well be over – although there are no guarantees.

“The light at the end of the cost-of-living tunnel is shining brighter - but we’re not out of the woods. The 14 consecutive interest rate hikes to try and get the inflation rate back down to the Bank of England’s 2% target have seen mortgage rates soar to levels not seen before the financial crisis. This jarring shift from the low rates status quo has had significant pounds and pence repercussions for many homeowners who have remortgaged this year. Higher mortgage rates have also pushed rents higher, with many landlords passing on the additional cost burden to tenants.

“It remains important to keep a keen eye on your finances and make adjustments if needed to maintain financial resilience. Remember, we all have a personal inflation number that is unique to us and could be far higher than the catch-all headline figure.”

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