Sunak Claims Success as Annual Inflation Rate Drops to 4.6 Percent

British Prime Minister Rishi Sunak walks at Downing Street in London, Britain, on Sept. 6, 2023. (Susannah Ireland/Reuters)

The UK’s annual inflation has slowed to 4.6 percent in October, falling sharply from 6.7 percent in September, the Office for National Statistics (ONS) said on Wednesday.

The latest figure came as a much-needed piece of good news for embattled Prime Minister Rishi Sunak, who came under scathing criticisms from the newly fired Home Secretary Suella Braverman.

The prime minister declared success in delivering his promise to slash inflation by half by the end of the year.

The pledge was the first of five priorities Mr. Sunak listed for the year in January. At the time, the latest Consumer Prices Index (CPI) inflation estimate was 10.7 percent in November 2022, down from a peak of 11.1 percent in the previous month.

According to the ONS, CPI inflation rose by 4.6 percent in October compared to the same month last year, down to a 6.7 increase in September. However, the figure reflected a sharp increase in prices between September and October last year rather than any price drop between the two months this year.

Prices, measured by CPI, remained the same in October compared to September, with monthly CPI being zero percent, but between September and October last year, prices jumped up by 2 percent.

The ONS said its model suggests that the annual CPI inflation in October last year was the highest since 1981 and the figure for October this year was the lowest since October 2021.

The monthly Consumer Prices Index including owner occupiers’ housing costs (CPIH), rose by 0.1 percent in October, and annual CPIH rate was 4.7 percent, down from 6.3 percent in September.

Core CPIH, which excludes items which prices fluctuate a lot, such as energy, food, alcohol, and tobacco, rose by 5.6 percent annually, compared to 6.1 percent in September.

The ONS said the biggest driver for the easing of both CPIH and CPI annual rates in October was housing and household services, with the annual rate for CPI being the lowest since records began in January 1950.

The second-largest contributor was food and non-alcoholic beverages, the ONS said.

The monthly CPIH for food and non-alcoholic beverages was 0.1 percent in October and the annual rate was 10.1 percent, down from 12.2 percent in September.

Sunak: Fiscal Discipline To Remain

Reacting to the figure on X, formerly known as Twitter, Mr. Sunak said, “In January I made halving inflation this year my top priority.

“I did that because it is, without a doubt, the best way to ease the cost of living and give families financial security.

“Today, we have delivered on that pledge,” he wrote.

In a separate post, Mr. Sunak said, “It’s involved hard decisions and fiscal discipline, rejecting calls for higher spending and more borrowing,” adding that the government “must stay the course to get inflation all the way back down.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the figures “should entrench expectations” that the Bank of England (BOE) can start to slash interest rates in about six months’ time.

“The three-month average of month-to-month annualised changes in our seasonally adjusted core CPI dropped to just 2.2 percent in October, essentially consistent with the 2 percent target,”  he said.

The BoE’s Monetary Policy Committee, which is tasked with keeping inflation at around 2 percent using tools such as interest rate-setting, have raised base rate 14 consecutive times, from 0.1 percent to 5.25 percent before halting the hikes in September.

Chancellor of the exchequer Jeremy Hunt said the government “took difficult decisions” to bring down public debt and in turn “made it easier” for the BoE to do their job.

“But we will continue to support them with the difficult decisions that they take on interest rates, because the job is not yet done,” the chancellor said.

Mr. Hunt also said there’s “more work to do” to bring inflation back down to 2 percent, adding, “

“But now we are beginning to win the battle against inflation, we can move to the next part of our economic plan, which is the long-term growth of the British economy, he said, calling next week’s budget statement “an autumn statement for growth.”

Recent labour market data from the ONS suggest earnings in British have began to outstrip inflation, with total pay growing by 1.4 percent and regular pay growing annually by 1.3 percent in the third quarter this year.

Other Pledges

Halving inflation is the only target met so far in the prime minister’s five pledges. It comes as the government suffered a major blow to its pledge to stop illegal immigrants from being smuggled in on small boats by the end of the year.

Immigration Minister Robert Jenrick said on Monday that deporting illegal immigrants, including asylum seekers to Rwanda, is an essential part of the government’s plan to stop the boats this year.

The Supreme Court on Wednesday ruled that the policy is illegal.

In the latest crossing, 615 people arrived on 12 boats on Sunday, according to provisional Home Office data. It brings the total number this year to 27,314.

The jury’s still out on Mr. Sunak’s other three promises, including growing the economy, reducing national debt, and cutting short the NHS waiting lists.