The chances of a fresh cut in interest rates from the Bank of England next week have been boosted by a report that shows shop prices falling at their fastest pace in more than three years.

The monthly snapshot from the British Retail Consortium showed prices were 0.8% lower this month than in October 2023 – compared to an annual fall of 0.6% in September.

In the latest evidence of waning inflationary pressure, the BRC said shop prices had fallen for the past three months. Prices of non-food items in October were down 2.1% on a year earlier – unchanged from September – while food prices rose by 1.9%, compared with 2.3% the previous month.

Helen Dickinson, the BRC’s chief executive, said: “Food inflation eased, particularly for meat, fish and tea as well as chocolate and sweets as retailers treated customers to spooky season deals.

“In non-food, discounting meant prices fell for electricals such as mobile phones, and DIY as retailers capitalised on the recent pickup in the housing market. With fashion sales finally turning a corner this autumn, prices edged up slightly for the first time since January as retailers started to unwind the heavy discounting seen over the past year.”

Dickinson said while households would welcome the continued easing of price inflation, the downward trajectory was vulnerable to geopolitical tensions, the impact of climate change on food supplies, and costs from planned and trailed government regulation.

The BRC’s findings followed Monday’s survey of the high street from the CBI showing consumers reining in their spending ahead of the budget. More retailers (41%) said the volume of sales was down in October on a year earlier than up (35%). The balance of -6 points compared with +4 last month.

Martin Sartorius, the CBI’s principal economist, said: “Retail sales volumes slipped back slightly in October, with some firms highlighting increased consumer caution ahead of this week’s autumn budget as a key factor.

“This weakness in activity was reflected across the broader distribution sector, with wholesale and motor trade firms also reporting declining sales. Looking ahead, retailers aren’t expecting an immediate turnaround, with annual sales set to be flat in November.”

Financial markets expect the Bank of England to respond to easing inflationary pressure by cutting borrowing costs from 5% to 4.75% next week. The latest official inflation figures showed the annual rate falling from 2.2% in August to 1.7% in September.