UK inflation remains stable for September as the Bank of England stops raising interest rates.
Inflation in the United Kingdom was 6.7% in September, which was unchanged from the previous month and somewhat higher than expected.
As anticipated, the headline consumer price index rose by 0.5% every month. Reuters polled economists, who predicted a 6.6% annual rate and a 0.5% monthly increase.
According to the Office for National Statistics, the greatest negative contributions came from food and non-alcoholic drinks, whose prices declined month over month for the first time since September 2021. Rising gasoline prices provided the biggest upward assistance to the headline rate.
The core CPI, which does not include volatile prices for food, energy, alcohol, and tobacco, came in at 6.1% year-over-year, down from 6.2% in August but still somewhat higher than the consensus estimate of 6%.
The Chancellor of the Exchequer of the United Kingdom, Jeremy Hunt, stated that while inflation seldom decreases in a straight line as we have observed in other G7 nations, "if we stick to our plan, then we still expect it to continue decreasing this year."
Today's news highlights how crucial this is for relieving the strain on companies and families.
The unexpected decline in the U.K. consumer price index to 6.7% in August, below forecasts, prompted the Bank of England to stop raising interest rates after 14 straight increases.
To control inflation, the Bank has steadily raised rates since December 2021, raising its main policy rate from 0.1% to a 15-year high of 5.25% in August.
The market currently sees the probability that the Bank would keep rates constant at its upcoming meeting on November 2 to be about 77%.
Interest rates that are "higher for longer."
According to Marcus Brookes, chief investment officer at Quilter Investors, it seems doubtful that the U.K.'s "slow and steady" road back toward the Bank of England's 2% inflation target will soon quicken.
Energy and gasoline prices are again rising due to escalating geopolitical tensions, and an economy with a devastating cost-of-living crisis is at risk of being hammered by inflationary pressures. In an email on Wednesday, he said that "for the time being, the higher for longer interest rate narrative will continue to persist."
Even though wages are now outpacing prices, Brookes said people have "yet to truly feel" the effects of the Bank's earlier tightening of monetary policy. In light of the Wednesday data, Brookes argued that policymakers may require "at least another rate rise."
While the Bank of England has "done enough," the organization "will not want to appear to be doing nothing" in the face of persistently high inflation, according to Brookes. "The question becomes when they have done enough, but with inflation taking so long to come back down to more palatable levels, that is a difficult question to answer and risks policy misstep," he said.
Official statistics released on Tuesday indicated an easing of labour market conditions and a moderating of wage prices, two highly monitored indicators for the Bank of England as it evaluates the potential impact of inflation on the British economy.
Compared to the Tuesday labour market print, the CPI data, according to Hetal Mehta, head of economic analysis at St. James's Place, "isn't the significant upside surprise that might make the BoE reconsider staying on hold at its next meeting in November."