U.K. inflation eased in October but by slightly less than expected, leaving the Bank of England on a narrow path as markets weigh the chances of a rate cut at next month’s final policy meeting of 2025.

• CPI: +3.6% y/y (vs 3.8% in September; 3.5% expected) — lowest since May
• Monthly CPI: +0.4% m/m (vs 0.0% prior)
• Core CPI: +3.4% y/y (vs 3.5% prior), +0.3% m/m
• PPI Input: –0.3% m/m; +0.5% y/y

Although inflation remains well above the BoE’s 2.0% target, the continued moderation—especially in core—adds to evidence that price pressures are stabilizing. Producer input prices fell on the month and are barely positive year-on-year, suggesting further pipeline disinflation ahead.

Policy makers held Bank Rate in a 5–4 split earlier this month, with Governor Andrew Bailey casting the deciding vote to keep policy unchanged while seeking “clearer evidence” of disinflation. Today’s release nudges the BoE closer to a cut in December, though the margin of downside surprise was small.

What could sway the BoE

• Fiscal backdrop: Chancellor Rachel Reeves’ Autumn Budget on Nov. 26—expected to raise taxes (likely outside income tax) while offering targeted cost-of-living support (e.g., energy relief)—could affect near-term inflation dynamics and the Bank’s growth-inflation trade-off.
• Growth pulse: Activity remains meager, increasing the allure of insurance easing if inflation’s descent persists.
• Services & pay: The BoE will watch services inflation and wage trends for confirmation that underlying pressures are easing.

Market take

Economists polled earlier this month largely expect a December cut, with another move possible early next year as inflation cools and growth stays soft. Given today’s near-consensus print, odds still favor an initial, cautious reduction—conditional on fiscal details and any late-arriving data before the decision window.