In September, the United Kingdom recorded a sharp decrease in the inflation rate.
Last month, the mentioned figure in the UK declined to 1.7%. The relevant information was released by the Office for National Statistics on Wednesday, October 16. It is worth noting that the specified data on the dynamic of the inflation process significantly increased market expectations that the Bank of England will decide next month on cutting interest rates.
Economists surveyed by the media predicted that the headline inflation rate to come in at a higher 1.9% for September. It is also worth noting that last month’s result was the first decrease in the corresponding indicator below the Bank of England’s 2% target since April 2021.
In August, headline inflation in the United Kingdom was fixed at 2.2%.
Core inflation in the UK in September was 3.2%. It is worth noting that the corresponding indicator does not take into account the prices of food, alcohol, tobacco, and energy. In August, core inflation in the United Kingdom was fixed at 3.6%. Analysts interviewed by the media predicted that this indicator will decrease to 3.4% in September.
Price growth in the services sector, the dominant segment of the United Kingdom’s economic system, was recorded at 4.9% last month. It is worth noting separately that this indicator is the lowest since May 2022. In August, inflation in the United Kingdom’s services sector was recorded at 5.6%.
Currently, Bank of England officials are considering the feasibility of deciding on lowering the cost of borrowing in November. In this case, they will pay close attention to data on core inflation and inflation in the service sector.
Money market pricing for a 25-basis-point November rate cut rose from 80% to 92% on the back of data released on Wednesday. Two more potential lowering of borrowing costs by a quarter of a percentage point each would take the Bank of England’s key rate to 4.5%. The United Kingdom’s financial regulator began easing monetary policy in August, starting to cut interest rates. Last month, the Bank of England decided to hold the cost of borrowing at the same level.
After the data on inflation in the United Kingdom were published in September, the British pound fell. This currency is down 0.6% against the US dollar at $1.299. It is worth noting that the corresponding dynamic reflects the more dovish expectations for the Bank of England.
London has made significant progress in the fight against rising prices for almost the last two years. In the relevant context, it is worth mentioning that in October 2022, headline inflation in the United Kingdom was fixed at 11.1%. In September of the current year, this indicator was 1.7%.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, stated that the data released on Wednesday provides reassurance that the United Kingdom moved into a more moderate inflation environment, aided by lower fuel prices.
Deutsche Bank’s Chief UK Economist Sanjay Raja stated that the inflation figures could lead the Monetary Policy Committee to consider a faster unwinding of restrictive policy, including sequential rate cuts.
