UK inflation has fallen below the 2 per cent target for the first time in over three years, according to the Office for National Statistics. The consumer price index (CPI) dropped to 1.7 per cent in September, down from 2.2 per cent in August, surpassing expert predictions of a more modest decline to 1.9 per cent. This unexpected decrease is likely to give policymakers at the Bank of England the opportunity to consider a slight interest rate cut in November, potentially bringing rates down to 4.75 per cent.
The Governor of the Bank of England, John Bailey, had previously hinted at a desire to lower interest rates, stating that rate cuts could become “more aggressive” if necessary. The September inflation figure is crucial for the Government to determine various tax and spending changes for the upcoming year, leading to a 1.7 per cent increase in UK state benefits and a 4.1 per cent rise in state pensions next April under the triple-lock policy.
Grant Fitzner, the chief economist at the ONS, attributed the decrease in inflation to lower airfares and petrol prices. Financial planning expert David Murray from abrdn expressed relief at the continued downward trend in inflation, suggesting that a cut to interest rates next month could be on the horizon. Some experts even speculate that the base rate could be reduced to 4.5 per cent by the end of the year.
This significant development in UK inflation marks a positive turn in economic indicators and may have implications for future monetary policy decisions. Stay tuned for more updates on this breaking news story as it unfolds.
