Four ways to get the tiger of inflation back in its cage

At last, a chink of light: inflation took a fairly hard fall in the year to October, easing from 3.8 per cent to 3.6 per cent.

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This was in line with the City’s and, more importantly, the Bank of England’s forecasts.

However, don’t underestimate the importance of the first fall in seven months. It is a real sign that the Bank’s central case, which holds that inflation should start to fall towards its 2 per cent target after an autumn peak, holds water.

It also provides a timely boost for beleaguered chancellor, Rachel Reeves, ahead of what still promises to be a deeply unpleasant Budget, by reducing her borrowing costs and offering her some much-needed breathing room. Not enough to ease the coming pain by much. But at this point, most people are probably of the view that we’ll take what we can get. But is the inflationary tiger now back in its cage, with its claws clipped? That remains an open question.

That consumer prices index, the basket of everyday goods (also known as the CPI) used to measure price changes, might have fallen, but it is still running too hot, greatly exceeding that two per cent target. The economy remains on the sick list, so the Bank will likely cut rates again at the December meeting of the Monetary Policy Committee (MPC). It nearly did last time. The vote to hold at 4 per cent was on a knife-edge at 5-4. But there is still work to be done, and the Reeves budget could complicate the task.