Inflation falls to three-year low with energy price cap

Inflation has fallen to its lowest level in nearly three years after a new energy price cap led to cheaper utility bills.

The Consumer Prices Index (CPI) was 1.5% in October compared to 1.7% the previous month, according to the Office for National Statistics (ONS).

It is the lowest rate of inflation since November 2016.

The drop was also bigger than expected with analysts forecasting a rate of 1.6%.

An ONS spokesman said: “A fall in utility prices due to a lowering of the energy price cap helped ease inflation in October.

“However, this was partially offset by rising clothing prices.”

The new six-month energy price cap for households not on fixed-term deals kicked in on 1 October.

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The industry regulator Ofgem took the decision in response to a significant drop in wholesale energy prices.

Woman shopping in East London second hand marketplace
Image: Lower prices were largely offset by a 1% rise in the cost of clothing

As a result, average gas and electricity prices slid by 8.7% and 2.2% respectively in October for 15 million homes.

Falling fuel prices also helped push down inflation, as did the continued decline in the price of furniture and homeware.

A further contributory factor was the slowdown in the inflation of products in the recreation and culture category.

Games and toy prices saw growth cut to 1% from 2.5% last month, ahead of the busy Christmas sales period, while book prices fell by 3.8% on discounting.

Food prices fell by 0.7% in October, due to cheaper meat, fish and vegetables, but alcohol prices rose after a 2.8% hike in the price of spirits.

However, the lower prices were largely offset by a 1% rise in the cost of clothing.

The Retail Prices Index (RPI), a separate measure of inflation fell to 2.1% last month from 2.4% in September. RPI was last lower in October 2016.

The ONS also said house prices in September rose by an annual 1.3% across the UK, unchanged from August after hitting a near seven-year low of 1% in June.

Property prices in London alone fell for the 15th month in a row, down by 0.4%.

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