Inflation is a measure of price rises – for example, if the rate of inflation is 4% then it means an item that cost £1 last year would now cost £1.04
Inflation fell to 3.6% in October in a welcome cost of living boost for UK households.
The rate of Consumer Prices Index (CPI) inflation was down compared to the 3.8% that was recorded in September.
Inflation – which measures how the price of goods or services have changed over time – has remained sticky over the last few months, with CPI also being stuck at 3.8% in July and August.
Inflation fell in October after energy bills went up by less than they did compared to a year earlier.
Energy bills rose by 2% in October 2025 after the Ofgem price cap was increase, but this is much less than the 9.6% energy bills went up by last year.
The Office for National Statistics (ONS) releases inflation data every month.
This marks the final inflation update ahead of the Autumn Budget next week. Chancellor Rachel Reeves has said she wants inflation to come down so the Bank of England has room to cut interest rates.
What is inflation?
Inflation is a measure of price rises. For example, if the rate of inflation is 4% then it means an item that cost £1 last year would now cost £1.04.
When inflation is lower, it does not mean prices have stopped rising – it just means they’re going up at a slightly slower rate than before.
The ONS calculates inflation based on a regularly updated “basket of goods” and services that represents what households are buying.
However, the main inflation figure you see in headlines is used to represent an average. This means the individual prices of some goods may be higher or lower than this main figure.
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How is inflation linked to interest rates?
The Bank of England has a target of 2% inflation. It had increased interest rates over the course of almost two years to try and lower inflation back to this target.
The idea is that, when interest rates are higher, borrowing becomes more expensive and this means people have less money to spend elsewhere. When people spend less money, this brings down demand and lower prices, which lowers inflation.
But a higher base rate pushed up mortgage payments for millions of homeowners, leaving households financially stretched. The base rate stood at just 0.1% in December 2021.
It reached a peak of 5.25% in August 2023 but has since been cut five times to its current level of 4%.
When did inflation reach a peak?
Inflation began to rise in 2021 and peaked at 11.1% in October 2022. The steady increase was largely due to higher costs of energy and food.
Demand for energy increased after Covid and then this was exasperated by the Russian invasion of Ukraine. The war also pushed up food prices, due to rising costs for fertilisers and animal feed.
Inflation fell to its lowest level in three years in September 2024 when it dropped to 1.7% but it started to creep up again the following month in October.
