UK inflation falls sharply, relieving pressure on Sunak

LONDON

U.K. inflation fell more than expected in October, data showed yesterday, relieving pressure on Prime Minister Rishi Sunak.

The Consumer Prices Index hit a two-year low at 4.6 percent, the Office of National Statistics said, dipping under a five-percent target set by Sunak, who faces a crisis in his Conservative party ahead of next year's general election.

CPI inflation slowed more than forecast by the Bank of England and analysts after reaching 6.7 percent in September.

"But while it is welcome news that prices are no longer rising as quickly, we know many people are continuing to struggle, which is why we must stay the course to continue to get inflation all the way back down to two percent," Sunak said, referring to the Bank of England's target.

U.K. annual inflation struck a 41-year peak at 11.1 percent in October 2022.

Analysts said the drop in U.K. inflation since the start of the year is thanks largely to interest-rate hikes from the Bank of England (BoE) and cooler energy prices worldwide.

Interest-rate hikes by other major central banks, including the Federal Reserve and European Central Bank (ECB), have helped bring down elevated inflation in the world's biggest economy and the eurozone.

U.S. consumer inflation cooled more than expected last month, data showed on Nov. 14.

CPI inflation increased 3.2 percent in the 12 months to October, down from 3.7 percent a month earlier.

Economists have stressed that stubbornly-high inflation could prompt central banks to keep interest rates at high levels for many more months - and may even be forced to keep on hiking borrowing costs.

This has fuelled worries that major economies could soon enter recession.