CPI Inflation falls to 3.6%

CPI Inflation falls to 3.6%

19 Nov 2025

Adam Gillespie, Partner, XPS Group, commented: "UK CPI inflation for the 12 months to October has fallen to 3.6%, providing some respite after three consecutive months at 3.8%. This is the right direction for DB pension schemes that are not fully hedged, and may appear to be welcome news for UK residents, businesses, and the Government. 
 
However, the news is not as favourable as it looks as inflation was already expected to fall with the effects of last year's bumper energy price increase dropping out of the annual comparison this month. Even with today’s slight decrease, there is still considerable work required to get inflation towards the Bank of England’s 2% target.
 
Today's inflation data arrives at a particularly sensitive time. Whilst the CPI figure is important, most observers will be far more focused on Chancellor Rachel Reeves' Autumn Budget on 26 November and its potential impact on medium and long-dated gilt yields, which have a more significant impact on funding positions. We have already seen material yield movements over recent days and weeks.
 
This short-term volatility is occurring alongside wider structural changes in the market, leading to fragmentation in the UK gilt curve that is amplifying adverse mismatches in pension schemes' hedging strategies. This is a timely reminder of the importance of robust LDI strategies that adapt to changing market conditions."