Consumer prices were just 0.1 percent firmer on the month in October, in line with market expectations. This left the annual inflation rate at 2.4 percent, matching its September outturn and so still within the 2.4 percent – 2.7 percent range seen since February.
The stability of the 12-month rate masked downward contributions from food and non-alcoholic drinks, where prices fell 0.2 percent on the month after a 0.4 percent increase a year ago, and clothing and footwear (minus 0.5 percent after 0.2 percent). Transport (minus 0.4 percent after minus 0.2 percent) also subtracted. However, downward pressure here was offset by the positive effects of housing and utilities (0.3 percent after 0.1 percent), miscellaneous goods and services (minus 0.1 percent after minus 0.5 percent) and communication (0.7 percent after minus 0.2 percent). As a result, the core CPI was only unchanged at September's level, in turn yielding a steady annual underlying rate of 1.9 percent.
The October results mean that headline inflation was just short of the 2.5 percent forecast contained in the BoE's November Quarterly Inflation Report. The rate is still above its 2 percent target - and has been for twelve consecutive months now – but another sub-2 percent core reading should help to ease any immediate worries about where prices might be headed. Interest rates are probably still headed up, but likely not until after March's Brexit.