Each month, the Office for National Statistics (ONS) publishes data on inflation and other economic indicators. In October, they reported that their measure of inflation, the Consumer Prices Index (CPI), dropped unexpectedly to 1.7% for the year ending in September. This marks the lowest inflation rate in over three years.

The primary factors behind this reduction were decreases in airfares and petrol prices. Given that the Bank of England has a target inflation rate of 2%, this dip could allow for a further interest rate cut when the Bank meets on 7 November. Following this decrease, there is now also some expectation that a second rate cut could follow in December.

The September inflation rate is significant, as it is typically used to determine the annual increase in state benefits due in April. This includes adjustments to Universal Credit, disability benefits, and carer’s allowance. With lower inflation, these benefits may see smaller increases.

However, some analysts suggest that the decline in inflation may be short-lived. Energy prices rose in October, which could shift the inflation outlook once again.