Inflation falls - 16th October 2024

The UK inflation rate fell this week below the 2% target to 1.7%, its lowest level since April 2021 and paves the way for further cuts in interest rates. Lower air fares and petrol prices were the biggest driver for this month's fall, these were partially offset by increases in food and non-alcoholic drink while the cost of raw materials for businesses fell driven by lower crude oil prices. 

The cost of living has surged in recent years, with inflation peaking at 11% in 2022. To slow the price rises the Bank increased interest rates to encourage people to spend less and bring inflation down. Falling inflation does not mean the goods and services reducing in price overall, it is just they are rising at a slower pace. 

Economists warned inflation may rise again in the coming months as October’s 10% energy price cap rise flows through and if tensions escalate in the Middle East this could spark a rise in energy prices, affecting both oil production and shipping as The Strait of Hormuz is a critical transport route.