The rate at which prices are rising dropped to 4.6% in the year to October, down from 6.7% in the year to September.
The sharp fall was due to cheaper energy prices.
In a bid to curb inflation, the Bank of England has increased interest rates to 5.25%, but held rates at its September and November meetings.
What does inflation mean?
Inflation is the increase in the price of something over time.
If a bottle of milk costs £1 but £1.05 12 months later, then annual milk inflation is 5%.
How is the UK’s inflation rate measured?
The Office for National Statistics (ONS) tracks the prices of hundreds of everyday items in an imaginary “basket of goods”.
Each month’s inflation figure shows how much these prices have risen since the same date last year.
You can calculate inflation in various ways, but the main “headline” measure is the Consumer Prices Index (CPI).
Food prices were little changed in September, but hotel prices fell, according to ONS figures.
What is ‘core inflation’?
“Core inflation” excludes the price of energy, food, alcohol and tobacco.
This measure was 5.7% in October, down from 6.1% in September.
The Bank of England considers this number as well as CPI when deciding whether to change interest rates.
Why had prices risen so fast?
Soaring food and energy bills helped drive inflation up.
Alcohol prices in restaurants and pubs also rose.
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How does raising interest rates help to tackle inflation?
The Bank of England has a target to keep inflation at 2%, but the current rate remains double that.
This makes borrowing more expensive, and means some people with mortgages see their monthly payments go up. Some saving rates also increase.
When people have less money to spend, they buy fewer things, reducing the demand for goods and slowing price rises.
Businesses also borrow less, making them less likely to create jobs; some may cut staff.
It held rates at that level at its two subsequent meetings in September and November.
What happens when inflation falls?
Lower inflation doesn’t mean prices drop – it means they rise less quickly.
The Bank of England has predicted that inflation will drop to about 4.5% by the end of the year and fall further in 2024.
Are wages keeping up with inflation?
This is higher than the rate of inflation was in the same period (6.7%), which means real wages grew faster than rising prices.
However, rises are starting to slow in some industries, and unions point out that many workers have actually received smaller pay increases, which led to widespread strikes over pay.
The government previously argued that big pay rises could push inflation higher because companies might increase prices as a result.
What is happening to inflation and interest rates in Europe and the US?
Many other countries have also been experiencing a cost-of-living squeeze for similar reasons: increased energy costs, shortages of goods and materials, and the fallout from Covid.
The annual inflation rate for countries that use the euro was estimated to be 2.9% in the 12 months to October, down from 4.2% in September, and its lowest level for more than two years.
As in the UK, the European Central Bank (ECB) has increased interest rates to try to bring rising prices under control.