Sharp drop in inflation in October 2023

  • Shunil Roy-Chaudhuri, Personal Finance and Investment Writer
  • 15 November 2023
  • 5 mins reading page

Annual inflation fell significantly to 4.6 percent in October 2023, down from the 6.7 percent consumer price inflation (CPI) figure in September.

Inflation has more than halved from the 11.1 percent peak it reached in October 2022. Even so, it is more than twice the 2 percent target rate the government sets for the Bank of England (BoE). But it does suggest the BoE may be bringing inflation under control.

So, while prices of goods and services did not rise as quickly in October as in September, they are still rising much faster than the long-term government goal. Moreover, UK annual inflation is substantially higher than the 3.2 percent US inflation rate and the 2.9 percent eurozone rate for October 2023.

Falling gas and electricity costs were a key driver of the reduction in inflation. The Office for National Statistics (ONS), which compiles the UK’s inflation data, said gas costs fell by 31.0 percent in the year to October 2023 while electricity costs fell by 15.6 percent.

But the ONS notes the price of gas in October 2023 was around 60 percent higher than in October 2021, while the price of electricity was around 40 percent higher. And it said the price of food in October 2023 was around 30 percent higher than in October 2021. So the UK remains in the shadow of a cost of living crisis, despite the welcome reduction in inflation.

Interest rates expected to fall gradually

Steve Mann, Head of Investment Specialists at Schroders Personal Wealth, said: ‘It is good news inflation has fallen but core inflation, which excludes energy and food prices, remains high. We’re unlikely to see interest rates fall until the later end of 2024, and then only gradually, as it’s important inflation is brought under control: it destroys real value for investors.’

Despite the drop in inflation, it is still higher than the best rates on bank current accounts (1) and only slightly lower than the best rates on bank savings accounts (2). So the buying power of cash holdings continues to be significantly eroded by inflation. If you are concerned about this then you may benefit from speaking with a financial adviser, who can advise on which investments might best suit your needs in the current environment.


Much of the data for this article comes from ‘Consumer price inflation, UK: October 2023’ (15 November 2023), available on the Office for National Statistics website.

(1) Moneyfacts, ‘Best high interest current accounts’, 14 November 2023.

(2) Moneyfacts, ‘The best UK savings rates this week’, 9 November 2023.

Important information

The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.

There is no guarantee by investing money it will keep level or beat inflation, particularly when inflation is high.

Forecasts are not a reliable factor of future performance.

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