Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group, said: “Today’s lower than expected inflation figure of 3.2% shows that price pressures are continuing to ease. This moderation is being driven partly by weaker economic activity and a softer labour market - developments that aren’t positive for growth or jobs but are helping to take some heat out of inflation. Against that backdrop, the Bank of England is likely to feel more confident that disinflation is taking hold as it approaches its closely watched rate decision later this week, with a cut now widely expected. For households, however, lower inflation doesn’t automatically translate into lower living costs. Many people are still feeling the cumulative impact of several years of price rises, particularly for essentials that rarely fall back quickly. Even as inflation cools, people continue to reassess how far their income stretches and whether their current spending remains sustainable. For those already in retirement, the picture is mixed. While easing inflation helps protect the real value of fixed incomes, it also means interest rates - and therefore returns on cash savings - are likely to fall, which can reduce income from short-term deposits. For those saving for, or drawing an income in retirement, stability and predictability matter most. Savers want to understand how changes in inflation and interest rates affect their longer-term plans, without feeling the need to react to every move from the Bank. While cash plays an important role for short-term needs, it’s also worth remembering that it rarely keeps pace with inflation over the long term. Maintaining a steady, long-term approach to pensions and investments can help protect the real value of money and keep people on track, even in a more uncertain economic environment.”
Charlotte Kennedy, Chartered Financial Planner at Rathbones, says: “The sharper-than-expected fall in inflation is a welcome surprise - one that could lift spirits ahead of Christmas. Prices are still rising, but at the slowest pace in eight months, with notable deceleration across key drivers of inflation - particularly food and drink. Looking beyond the headline figure, core inflation - which strips out the impact of typically volatile energy and food prices - is now at its lowest rate for more than four years. This better-than-expected inflation reading paves the way for a possible pre-Christmas rate cut, particularly given the need to stimulate the economy and address the ongoing malaise in employment and job opportunities. After a prolonged period of elevated inflation, the latest figures suggest the economy is entering the final stretch towards more normal levels. Measures announced at the Budget - such as freezing rail fares until 2027, cutting fuel duty, and reducing energy bill costs - are expected to shave around 0.5 percentage points off headline inflation by the middle of next year. This raises the prospect of reaching the Bank of England’s 2% target in the not-too-distant future. However, we are not out of the woods yet. It remains important to recognise that each of us experiences a personal inflation rate based on our individual spending habits. Making the necessary adjustments is key to maintaining financial resilience - especially during the festive period, which is often characterised by excessive spending."
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