Inflation rate down but food prices up 4.9%

Jacob Grattage, Reporter, Business & Accountancy Daily. Croner-i

Latest inflation figure shows a slight drop to 3.6% after relatively low increases in the gas and electricity price cap, but cost of food continues to soar.

As widely expected, inflation has dropped to 3.6% in October 2025, down from a stubborn rate of 3.8% where it was stuck for three months. Year on year the rate has got worse, with last October’s figure 3.2%.

However, food inflation was still painfully high at 4.9%, up from 4.5% in a single month. On a monthly basis, prices rose by 0.5% in October 2025, compared with a rise of 0.1% a year ago. The biggest price rises hit bread and cereals, and fruit and vegetables, but the detailed figures showed that food prices were up virtually across the board with sugar, jam, honey, syrup, chocolate, and sweets all up on the month.

Kris Hamer, director of insight at the British Retail Consortium (BRC), said: ‘Food inflation edged back closer to 5%, after some respite in September, in what will be unwelcome news for consumers just a week before the Budget.

‘Despite this rise, headline inflation fell for the first time in seven months in October, helped by the introduction of a new energy price cap.

‘There will also be some relief that, while the cost of the weekly shop remains high, some products including olive oil did fall in price on the month.

‘Having seen the inflationary impact of last year’s Budget, it is essential that the chancellor does not come knocking at the door of retail once again.’

The meagre drop in inflation was in line with Bank of England expectations, so there are muted hopes the base rate could be cut to 3.75% at the next meeting of the monetary policy committee on 18 December.

UK inflation rising to 3.6% in the year to October, a fall from the three preceding months, means a Bank of England rate cut in December is now very likely, predicted George Prior, CEO of deVere Group. ‘Savers who stay entirely in cash when inflation remains above target and interest rates are falling are likely to see real returns erode.

‘With inflation still at 3.6% and deposit yields poised to move downward, the risk of negative real returns looms.’

Budget worries are pervading the business community so relatively high inflation in the UK is a major negative compared with the EU average of 2.2%.

Anna Leach, chief economist at the Institute of Directors, said: ‘We’re drawing ever closer to a Budget which is expected to dampen already subdued demand further via another increase in the tax burden.

‘While uncertainty will hopefully diminish, that is unlikely to fully cancel out the drag on investment and hiring from further tax rises. There’s one more inflation release before the next interest rate decision, but with a weaker near-term outlook in prospect, it seems more certain that the monetary policy committee will on balance cut rates in their December meeting.’

Inflation would have been higher had lower gas and electricity prices after the latest Ofgem price cap not fed into the figures in October. This saw gas prices up by 2.1% in October, compared with a 13.0% hike the previous year. Electricity was up 2.7% in the 12 months to October, compared with a rise of 8.0% year on year.