Slower growth in energy prices were behind a fall in the UK inflation rate to 3.6% which could prompt a pre-Christmas cut in interest rates.

Chief economist at the Office for National Statistics (ONS), Grant Fitzner, says the easing in price growth from 3.8% was driven mainly by gas and electricity prices following changes in the Ofgem energy price cap.

He added: “The costs of hotels was also a downward driver, with prices falling this month. These were only partially offset by rising food prices, following the dip seen in September.

“The annual cost of raw materials for businesses continued to increase, while factory gate prices also rose.”

Food price inflation remains a key concern after increasing last month by an average 4.9%.

Ben Jones, lead economist at the CBI, said: “With Q3 GDP figures confirming a weak growth backdrop, and the labour market continuing to soften, today’s figures add to the evidence that price pressures are gradually subsiding. 

“Combined with the likelihood of further fiscal consolidation measures at the Budget, the data should give the Bank’s Monetary Policy Committee confidence that inflation risks are diminishing. If this trend continues, the case for an interest rate cut in December looks increasingly compelling.” 

Kevin Brown, savings specialist at Scottish Friendly, said: “With inflation finally moving lower, it now looks increasingly likely the Bank of England will reduce borrowing costs at its next meeting.

“That prospect brings both positives and negatives. For borrowers, a rate cut should translate into cheaper mortgages, offering welcome relief to those coming to the end of their current deal and looking to secure a new one.”

Stuart Morrison, research manager at the British Chambers of Commerce said: “Businesses will be hoping October’s inflation rate of 3.6% is further evidence that inflation may now be past its peak. That’s in line with forecasts by the Bank of England and the BCC.  

“However, the economy remains vulnerable, and firms are under no illusion about the huge cost pressures they continue to face. Our latest survey data shows inflation is the second biggest concern for businesses after tax. The two are intrinsically linked with many firms telling us the employer NICs hike has forced them to put up prices.  

“Business can’t be in the firing line again at next week’s Budget. The national insurance hike, announced in last year’s statement, has fuelled inflation, hit investment and damaged job opportunities. Those are not the ingredients for the sustained growth we all want to see.  

“The Chancellor must use her statement next Wednesday to ease the cost burden for business, not add to it. In short, no more tax on business.”