The ONS has released the latest UK Consumer Prices Index data, showing inflation easing to 3.6% in the year to October 2025, down from 3.8% in September.
The modest fall, which had been widely expected, was driven largely by lower costs in housing and household services, which made the biggest downward contribution to both CPIH and CPI. This was partially offset by rising prices in food and non-alcoholic beverages.
Notably, this marks the first fall in inflation in five months. With the Budget only a week away, advisers and wealth managers will be watching every data point closely. Today’s print could have implications for client cashflow planning, expectations around future rate cuts, the timing of mortgage refinancing decisions, and portfolio positioning as markets continue to interpret the Bank of England’s next move. It’s positive news for Rachel Reeves and her budget planning also for interest rates as it it makes it easier for the BoE’s MPC to vote for an interest rate cut in December. As uncertainty builds, advisers will be looking for clarity on whether this cooling in inflation is the start of a more durable trend, and what it means for clients across both accumulation and decumulation phases.
Experts from across the industry have been sharing their reaction to today’s inflation data and what they mean as follows:
Danni Hewson, AJ Bell head of financial analysis, comments:
“The biggest problem with this latest fall in headline inflation is that households are still paying more, with the reason for the drop to 3.6% primarily down to a quirk with energy prices. Although the energy price cap has gone up, it’s not gone up by as much as it did last year.
“That’ll be cold comfort for families paying more for their gas and electricity who will also be finding that food prices have been ticking back up, as staples like bread, meat and potatoes all cost more than they did even a month ago.
“Today’s data could have a silver lining, with market expectation that the Bank of England will deliver an interest rate cut before Christmas edging up, although there is of course a rather large elephant taking up most of the space in the room.
“If Rachel Reeves’ upcoming Budget includes policies which could be seen as inflationary, then those rate setters might decide they need to take a bit more time to see exactly how the economy deals with the chancellor’s measures. It’s also notable that the ONS points to a rise in factory gate prices, as many producers as well as retailers seek to offset costs from government measures such as the increase to employer National Insurance payments delivered in the last Budget.
“A fall in inflation for the first time since March is good news but at what is the most expensive time of year for many families, it might not feel like it. With consumer confidence shaken by the last few months of pre-Budget pitch rolling, next week’s set piece fiscal event needs to deliver more than just savings for the Treasury.”
Commenting on the inflation data, Charlie Ambler, Co-Chief Investment Officer, Partner at wealth management firm Saltus, said: “Since the Bank of England signalled earlier this month that inflation has now peaked, expectation of an interest rate cut in December has been building. While inflation is still well above the 2% target, falling to 3.6% in October, the Bank is unlikely to abandon its slow and steady rate cutting cycle, which largely hangs on controlling services inflation and wage pressures.
“Future rate decisions will also be heavily informed by the reforms unveiled in the Autumn Budget, with the Chancellor expected to announce a wave of tax hikes. While some rumoured reforms have been quashed, such as cutting the tax-free pension lump sum limit, constant speculation has impacted investor behaviour and highlights how stability is the key to unlocking growth. The economic environment remains challenging, with public finances under pressure and sluggish growth figures dampening confidence in the economy.
“Amid significant uncertainty, there has been a renewed focus on tax-efficient investing, along with a continued surge in demand for safe haven assets. Investors should not lose sight of the need to prioritise quality and resilience in their portfolios. In practice, this means adopting a patient, disciplined approach with a focus on long-term returns.”
Abhi Chatterjee, Chief Investment Strategist, Dynamic Planner said: “The latest inflation figures from the UK offer a much-needed, if modest, respite from the corrosive cost-of-living crisis. The headline Consumer Price Index (CPI) eased to 3.6% in October, a welcome deceleration from the 3.8% recorded in September. This trajectory aligns neatly with the Bank of England’s forecasts, allowing the Governor to breathe a collective sigh of relief and tentatively contemplate a clearer path toward eventual interest rate cuts. However, a closer reading of the data suggests that celebratory corks should remain firmly corked.
“While falling energy prices and a significant downward contribution from Housing and household services provided the main drag on the overall rate, the persistent squeeze on household budgets is starkly exposed by food and non-alcoholic beverages, which saw a worrying 4.9% price increase, barely alleviating the pain on the average consumer. Crucially, Services inflation, the key barometer of domestic wage and pricing persistence, also edged down to 4.5% from 4.7%. This is significant, bolstering the Chancellor’s confidence ahead of the November budget and providing the political oxygen needed for potential “feel good” fiscal measures. While this movement allows both monetary and fiscal policymakers a moment of respite, trepidation is warranted.
“We can hope that “peak inflation” is definitively behind us, but a sustained recovery requires more than just a few favourable readings. A lasting return to economic health hinges on a period of prolonged good news coupled with a decisive uplift in UK investment to truly move the dial beyond mere stabilization and onto a convincing path of structural growth. The woods maybe thinning, but we are far from the rolling fields and clear skies.”
Lindsay James, investment strategist at Quilter said: “Today’s figures show that headline inflation has come in at 3.6%, which is in line with expectations and reflects the continued easing of price pressures across the economy. Energy and restaurant and hotel costs helped to lower the headline rate but food inflation actually ticked up unexpectedly.
“Although the direction of travel is improving, the wider economic backdrop remains fragile. Growth has been subdued all year, and the labour market is now cooling at a faster pace. The economy is clearly at a point of significant risk as we move towards 2026. With quarter on quarter growth successively weakening through 2025, incoming significant tax hikes on both corporates and individuals could snuff out remaining limited optimism. Amidst rising unemployment , ill thought-out plans to target the tax relief on offer from salary sacrifice pensions not only store up greater problems for the future but also make workers even more expensive for companies who have already been hit hard by hikes to National Insurance and the minimum wage.
“With the Budget now seemingly at risk of missing already low expectations, economic growth seems likely to come under further pressure. The flipside to this is that persistently above-target inflation may come down earlier than expected, ushering in larger rate cuts in its wake. Markets had already been pricing a strong 80% likelihood of an interest rate cut in December. Today’s data reinforces the view that inflation is now on a clearer downward trajectory and that the Bank of England will have scope to continue easing policy.
“However, the return of inflation towards target is as much a reflection of slower activity as it is of any meaningful improvement in the supply side of the economy. While falling inflation provides some relief for households, it also highlights the challenge of generating stronger, more sustainable growth. Any rate cuts delivered in the coming months will be responding to an economy that is still struggling to build momentum.”
Kevin Brown, savings expert at Scottish Friendly, has commented on this morning’s inflation figures saying: “With inflation finally moving lower, it now looks increasingly likely the Bank of England will reduce borrowing costs at its next meeting.
“That prospect brings both positives and negatives. For borrowers, a rate cut should translate into cheaper mortgages, offering welcome relief to those coming to the end of their current deal and looking to secure a new one.
“For savers, however, the picture is less rosy. Falling interest rates typically feed through to lower savings returns, so now is the time to shop around for the best deals. The silver lining is that lower inflation also means savers’ cash is no longer losing purchasing power as quickly.
“But for anyone relying heavily on cash, it’s worth remembering that, over the long term, investing remains the only reliable way to outpace inflation and protect the real value of your wealth.
“As the speculation mounts around the future of the cash ISA in next week’s Autumn Statement, we believe there is a strong case for reducing the cash ISA allowance to boost savers’ returns. We believe that a limit could be set at as low as £8,000, which could give savers enough of an opportunity to build up a sizeable emergency pot, while at the same time encouraging excess funds to be invested into the stock market.
“The UK’s reliance on cash savings is one of the biggest drags on household wealth creation. Around £360 billion is held in cash ISAs, often earning rates that struggle to keep pace with inflation—meaning savers are seeing their spending power diminish.
“By contrast, UK equities have historically delivered real returns of roughly 6% per year. Even a modest reallocation of savings into equities could materially improve outcomes for households and support investment in UK businesses.”
Glenn Thomas, CEO and Global Practice Leader Health & Employee Benefits at Howden, commented: “Though a slight fall in inflation may offer a glimmer of hope to the wider economy, it will not ease the minds of business leaders who are facing medical inflation rates of 7% – plus CPI on top – for their employee benefits in 2026.
“As a result of this cost pressure, most businesses are investing in preventative healthcare measures in a bid to curb the impact of surging prices. This is forcing employers to shake up their current healthcare plans, and might impact the provision available to employees next year. As additional strain on the NHS pushes more people towards private healthcare, insurers have a responsibility to provide clarity on premiums, and the industry as a whole must prioritise clear communication across the board to work in partnership to deliver the most effective solutions.”
Sarah Pennells, Consumer Finance Specialist at Royal London, said: “The latest fall in the inflation rate is a welcome gift in the lead up to the festive season – and a step in the right direction as many households are still finding it hard to balance their budgets. Our research shows that one in ten people (10%) are struggling to pay their household bills, with a further 3% in financial crisis, and only one in four describe themselves as comfortable.*
Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group, said: “Today’s fall in inflation to 3.6% will no doubt be welcome news for the Chancellor as she finalises next week’s Budget. It suggests the worst of the recent inflation surge is behind us, but persistent price rises for everyday basics like food underlines that we are not out of the woods yet. As the Budget approaches, the focus will be on whether new policies can stimulate economic growth while sustaining this downward trend in inflation and support households through what remains a challenging environment. Budget day should provide some much-needed clarity on the Government’s fiscal priorities for the year ahead.
“The current environment highlights the importance of staying proactive about personal finances and retirement planning. For those approaching retirement, annuity rates continue to look attractive in the current interest rate environment. However, with rising costs still adding pressure, it’s increasingly important for people to keep track of their spending and ensure their income is keeping pace in real terms. For savers, it’s worth remembering that cash rarely keeps up with inflation over the long term. A diversified, long-term approach – through pensions or investments, as well as easy access ‘rainy day’ cash savings – remains one of the most effective ways to protect and grow the real value of savings, particularly in a world where inflation may take longer to settle back at target.”
Adam Gillespie, Partner, XPS Group, commented: “UK CPI inflation for the 12 months to October has fallen to 3.6%, providing some respite after three consecutive months at 3.8%. This is the right direction for DB pension schemes that are not fully hedged, and may appear to be welcome news for UK residents, businesses, and the Government.
However, the news is not as favourable as it looks as inflation was already expected to fall with the effects of last year’s bumper energy price increase dropping out of the annual comparison this month. Even with today’s slight decrease, there is still considerable work required to get inflation towards the Bank of England’s 2% target.
Today’s inflation data arrives at a particularly sensitive time. Whilst the CPI figure is important, most observers will be far more focused on Chancellor Rachel Reeves’ Autumn Budget on 26 November and its potential impact on medium and long-dated gilt yields, which have a more significant impact on funding positions. We have already seen material yield movements over recent days and weeks.
This short-term volatility is occurring alongside wider structural changes in the market, leading to fragmentation in the UK gilt curve that is amplifying adverse mismatches in pension schemes’ hedging strategies. This is a timely reminder of the importance of robust LDI strategies that adapt to changing market conditions.”
