In September, annual consumer price inflation in the UK held steady at 6.7%, surpassing the predictions of economists, according to official data released on Wednesday.
This unexpected development had previously led financial markets to anticipate that the Bank of England would maintain its interest rates at 5.25% on November 2. Earlier, the Bank had paused its rate hike strategy in September when inflation unexpectedly dipped in August, just a day before the Bank's official announcement.
The data released on Wednesday also revealed that core inflation, which excludes the impact of fluctuating food, energy, alcohol, and tobacco prices and is often considered a key gauge of price trends, experienced a smaller-than-expected drop, having decreased from 6.2% in August to 6.1% in September.
Service price inflation, a pivotal component of the Bank of England's consumer price index, experienced an uptick to 6.9% in September, compared to the 6.8% registered in August.
In October 2022, UK consumer price inflation reached its peak at 11.1%. This surge was primarily driven by escalating energy prices in Europe, which followed Russia's invasion of Ukraine. These circumstances exacerbated the existing pressure caused by supply chain disruptions and labor shortages stemming from the aftermath of the COVID-19 pandemic.
According to the Bank of England's most recent forecasts from August, inflation is expected to persist above its 2% target until early 2025.
The British government is equally concerned about the inflationary pressures, particularly after Prime Minister Rishi Sunak had earlier pledged to cut inflation in half this year. The result has been a challenging situation for many households as their wages struggle to keep pace with the rising prices of goods and services, leading to declining living standards.
“As we have seen across other G7 countries, inflation rarely falls in a straight line, but if we stick to our plan then we still expect it to keep falling this year," said U.K. Finance Minister Jeremy Hunt after the data was released.
In the United Kingdom, consumer price inflation continues to be the highest among major developed economies, roughly aligning with France and Italy, where inflation rates reached 5.7% and 5.6%, respectively, in September.Login in Personal Account