London, November 21, 2025
The United Kingdom’s Consumer Prices Index (CPI) inflation rate decreased to 3.6% in October 2025, the lowest level in four months, reflecting easing inflation pressures as the Bank of England monitors ongoing economic developments and inflation dynamics.
Inflation Trends and Metrics
The CPI rate of 3.6% in October marks a decline from 3.8% recorded in September 2025, signaling a continuing downward trend in price growth. The broader CPIH measure, which factors in owner-occupiers’ housing costs, also fell to 3.8% from 4.1% in September. Monthly increases in CPIH moderated to 0.4% in October, compared with 0.6% in the same month a year earlier, indicating softer month-on-month inflationary pressures.
Inflation Drivers and Persistent Pressures
While the overall inflation momentum is easing, some price pressures remain elevated. Services price inflation has moderated and is anticipated to continue its decline. However, notable inflationary contributions persist in areas such as food, beverages, and tobacco, which add approximately 0.4 percentage points above the Bank of England’s target. Additionally, administered prices—including Vehicle Excise Duty and sewerage charges—also contribute around 0.4 percentage points to the inflation overshoot.
Monetary Policy and Bank of England Response
The Monetary Policy Committee (MPC) of the Bank of England has concluded that CPI inflation has peaked. At its November 2025 meeting, the committee opted to maintain interest rates at 4%. Nonetheless, there was dissent, as four members voted for a reduction of 0.25 percentage points to 3.75%. Analysts forecast a potential rate cut in December 2025, contingent on the full assessment of the November budget’s impact on the economy.
Outlook for Inflation
The Bank of England projects that CPI inflation will decline further to 3.2% by March 2026, with services inflation expected to soften from 4.7% to 4.3%. Market participants surveyed anticipate CPI inflation to approach the targeted 2% level within two years, estimating 2.3% in one year and 2.1% in two years.
These developments underscore a cautiously improving inflation landscape in the UK, with policymakers closely monitoring inflation dynamics and economic indicators as they prepare to adjust monetary policy to support economic stability and growth.