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UK inflation drops to an almost three-year low

By Lawrence Gash

Latest data increases speculation of a rate cut in the near future

Inflation in the United Kingdom dropped to its lowest level in nearly three years in October, according to data from the Office of National Statistics.

Consumer prices increased by an annual rate of 1.5 per cent, lower than September’s 1.7 per cent and the lowest consumer price index readings since November 2016.

The news comes as the UK enters general election season and has increased expectations that the Bank of England (BoE) could cut interest rates in the near future in an attempt to boost the economy.

Two BoE policy makers voted in favour of cutting rates last week, rates citing a cooling in the labour market, continued Brexit uncertainty and the global economic slowdown.

While some employers are suffering from this cooling of the labour market, as the Brexit looms nearer and nearer employees have benefited and have been able to demand higher wages in some sectors. The latest ONS data on wage inflation found that for the three months to September regular pay was up 3.6 per cent year on year with pay including bonuses up by the same amount.

The BoE expects inflation to slow to 1.25 per cent early next year due to further energy and water price caps.

Gas prices fell by 8.7 per cent and electricity prices dropped by 2.2 per cent in October from September. The cost of motor fuel also reduced slightly. Although families will welcome such drops, they have also had to contend with a moderate rice in the price of clothing and footwear.

One inflation measure that excludes energy, fuel, alcohol and tobacco found inflation unchanged at 1.7 per cent.

FURTHER READYING: UK avoids recession but economy grows at slowest annual rate since 2010

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