Annual CPI inflation rises to 2.3 per cent in October 2024

Annual CPI inflation rose to 2.3 per cent in October 2024, up from 1.7 per cent in September, according to ONS figures published on 20 November 2024¹. The National Institute of Economic and Social Research (NIESR), which published its CPI Tracker the same day, said the September figure had been a temporary dip driven by base effects from last year, and that the October increase came amid the recent hike in the Ofgem energy price cap¹.

Services inflation remained the main contributor to the headline rate, recording 5.0 per cent in October, which NIESR said kept core inflation elevated at 3.3 per cent¹. NIESR's own underlying inflation measure, which excludes 5 per cent of the highest and lowest price changes to eliminate volatility, recorded just 1.3 per cent, remaining around the lowest levels in nearly three years¹. NIESR described this as a positive development indicating that the headline rate is being driven by large price increases in a few sectors such as energy, with inflation rates broadly falling for most items¹.

NIESR forecast that headline inflation would rise further towards the end of the year as base effects continue to drop out, likely rising above 3 per cent in early 2025¹. It said inflationary pressures stemming from the new budget and global uncertainty surrounding the Trump presidency would likely keep interest rates higher for longer than previously anticipated¹.

Why it matters for households

The headline rate is the figure most commonly used to describe how fast consumer prices are rising overall, and it feeds into the setting of Bank Rate by the Bank of England's Monetary Policy Committee. A higher annual rate means prices across the basket of goods and services measured for CPI are rising faster than they were in September, though the 2.3 per cent figure is an average across many items rather than a change that applies to any single household's spending.

The energy element is the part most directly tied to household bills. NIESR links the October increase to the recent rise in the Ofgem energy price cap, which limits what suppliers can charge domestic customers on default and standard variable tariffs. The cap is not a cap on total bills: what a household pays depends on how much gas and electricity it uses, so the effect of a cap change varies by usage.

NIESR's forecast that inflation could rise above 3 per cent in early 2025 matters for anyone holding savings or debt whose interest rate tracks Bank Rate, and for anyone whose income is uprated in line with an inflation measure. NIESR also said the pace of rate cuts is expected to be slower than previously anticipated and that rates may stay elevated for longer¹. The next inflation figures are published by the ONS on its usual schedule.

What happens next

NIESR said it expects headline inflation to rise further towards the end of 2024 and likely above 3 per cent in early 2025 as base effects drop out¹. It said it expects the Bank of England to continue cutting rates in 2025, but more slowly than previously anticipated, with rates potentially staying elevated for longer¹. No further dates for ONS releases or Bank of England decisions are given in the material published on 20 November 2024¹.