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UK inflation slowed more than expected to 4.6 percent in October due to a fall in energy prices, allowing Prime Minister Rishi Sunak to declare he has fulfilled his promise to halve inflation by the end of the year.
The year-on-year increase in the consumer price index was smaller than the 4.8 percent expected by economists and well below the 6.7 percent pace recorded in September.
Sterling fell 0.22 percent against the dollar to $1.2470 on Wednesday morning as data reinforced markets’ belief that the Bank of England has completed its rate hike.
The figures will come as a relief to Sunak, who said in January he wanted to halve inflation to 10.7 percent by the end of the year.
The sharp fall in headline inflation was partly due to a reduction in energy regulator Ofgem’s price cap, reflecting lower wholesale gas prices.
The core CPI rate, which excludes energy and food, rose 5.7 percent in the 12 months to October, compared with 6.1 percent in September. The service sector inflation rate, which serves as an indicator of domestic price pressures and is closely monitored by the BoE, fell to 6.6 percent from 6.9 percent.
The slowdown in Britain’s inflation rate reflects slowing price growth in other major economies and is further evidence that the central bank tightening cycle is over.
U.S. consumer price growth fell to 3.2 percent in October from 3.7 percent in the previous month, according to figures on Tuesday, while in the euro zone inflation fell to 2.9 percent in September from 4.3 percent October sank.
The more favorable inflation readings will fuel the discussion about when and where the first interest rate cuts are likely to take place. In the UK, the BoE wants to see conclusive evidence that price growth and the labor market have cooled before considering cutting borrowing costs.