Sky News request: Inflation data tomorrow

Inflation is a key concern for the Bank of England, so any signs that inflation is not heading back to 2% could put the brakes on a Christmas rate cut. Given that the next base rate announcement would not be until February, we could have a prolonged winter of discontent.

If inflation drops, even marginally on Wednesday, a rate cut looks almost certain at midday on Thursday. But if it stays at the same level, we may have to wait until the next meeting of the Monetary Policy Committee in early 2026 as Andrew Bailey may decide to side with the hawks again. What we do know is that businesses and households alike desperately need a rate cut to help with the immense financial pressure many are under.

Any fall in inflation will be welcomed, but the fact is it remains stubbornly above the Bank of England's own 2% target. And with recent strong wage data showing real wages are continuing to rise, despite higher unemployment and no evidence of productivity gains, the economy is far from in good health. Consequently, cutting interest rates now would appear imprudent. That said, the Bank may still opt for a 0.25 percentage point cut — more to signal intent than because the inflation battle has truly been won.

Considering the uncertainty caused by the calamitous build-up to the incredibly late Budget, it should not be a surprise if inflation falls by more than predicted. This will be great news for homeowners as, coupled with slack wage growth, it may mean the Bank of England slashes rates by 0.5%. It’s not what the market is pricing in, but it’s a real possibility given the state of the economy. Reeves will thank Bailey if he does this as it would give the economy a boost pre and post Christmas, when retailers really need it.

Data released on Tuesday shows a weakening jobs market, which could lead to inflation reductions, albeit marginal. Also, last week official data showed the economy contracted, as businesses and households put spending on hold. That could bring down inflation. A cut is still expected from the Bank of England although it could well be quite tight.

UK CPI inflation eased to 3.6% in October 2025 from 3.8% in September, largely due to the effects of the October energy price cap adjustment now fully feeding through, resulting in lower household energy bill increases compared to the prior year. Food inflation, however, proved persistent, rising to 4.9%—a key area of upward pressure. Services inflation, a primary concern for the BoE, continued its gradual decline, falling to 4.5%, though it remains elevated. Base effects from the previous year may influence upcoming readings in either direction. Markets are currently assigning an 85% probability to a 0.25% rate cut, lowering the Bank Rate from 4% to 3.75% at Thursday's meeting. The decision is on a knife-edge. A November inflation print at or below 3.4% would likely tip the scales toward a cut, while 3.6% or above could lead to another split vote and a hold.