Consumer price inflation eased to 3.6 per cent in October, down from 3.8 per cent in September, according to the latest figures from the Office for National Statistics (ONS), as the Chancellor prepares to deliver a Budget that could feature significant pensions measures.

The slowdown was broadly in line with Bank of England (BoE) forecasts and strengthened expectations that the Bank will cut interest rates to 3.75 per cent from 4 per cent in December.

Following the release, sterling weakened modestly against the US dollar, two-year gilt yields fell, and interest rate futures priced in a slightly faster pace of rate cuts through 2026.

Commenting on the inflation data, Chancellor, Rachel Reeves, said the cost of living “is still a big burden on families right across the country” and signalled that next week’s Budget would include “targeted action” to help bring inflation down further.

Standard Life retirement savings director, Mike Ambery, noted that the fall in inflation would be "welcome news" for the Chancellor as she finalises the statement.

“It suggests the worst of the recent inflation surge is behind us, but persistent price rises for everyday basics like food underline that we are not out of the woods yet,” he warned.

As the Budget approaches, he said the focus would be on whether new policies can stimulate growth “while sustaining this downward trend in inflation and support households through what remains a challenging environment”.

Budget day, on 26 November, should bring “much-needed clarity” on fiscal priorities, he added.

Quilter investment strategist, Lindsay James, suggested that today’s figures further supported the case for the BoE to begin easing interest rates.

A clearer and more sustained downward inflation trajectory, she said, could allow the Bank to cut “faster and more decisively” through 2026.

From a defined benefit (DB) perspective, XPS chief investment officer, Simeon Willis, noted that the modest consumer price index (CPI) fall contrasted with a “more pronounced decline” in long-term inflation expectations during October.

The shift, combined with steady short-term inflation, is “broadly positive” for scheme funding levels, he said, with falling demand for long-dated inflation protection pointing to improving market confidence.

XPS partner, Adam Gillespie, added that the October print had been expected, given the fallout of last year’s energy price spike, but stressed that progress towards the BoE’s 2 per cent target remained slow.

Attention, he said, is now turning to the Budget and its likely impact on medium- and long-dated gilt yields, which play a far greater role in DB funding.

"Recent yield volatility, combined with structural shifts in the curve, has increased hedging mismatches for some schemes, highlighting the need for adaptable LDI strategies," argued Gillespie.

Meanwhile, My Pension Expert policy director, Lily Megson-Harvey, warned that although inflation continues to ease, it still places pressure on households, especially those planning for retirement.

Consequently, she stressed that access to affordable advice remained "essential" as savers adjust their plans amid higher living costs, and urged the government to ensure any Budget measures strengthened long-term resilience rather than allowing retirement security to become “a privilege for the few”.

The inflation update arrives at a pivotal moment for the pensions industry, amid rumours of Budget announcements on pension changes.

Indeed, calls for the Chancellor to avoid making changes to salary sacrifice in her upcoming Budget have continued to grow, with industry research revealing that nearly two-fifths (38 per cent) of Brits will save less into their pension if salary sacrifice is capped.

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