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Consumer price inflation remained steady in September despite another drop in food price growth, as higher petrol prices helped sustain pressures in a slowing economy.
Official figures showed that the UK’s headline rate rose by 6.7 per cent last month, compared with the same period last year. It was unchanged from August and just above economists’ forecasts of a dip to 6.6 per cent.
Inflation has been steadily declining this year after a peak of 11.1 per cent last October, and is at the lowest since the outbreak of the war in Ukraine in February 2022. However, a recent upswing in global oil and gas prices has helped to arrest the decline.
A closely watched measure of core inflation, which strips out volatile food and energy costs, declined from 6.2 per cent to 6.1 per cent, higher than the 6 per cent forecast by economists.
The Office for National Statistics said that petrol costs helped to keep inflationary momentum high last month, with average pump prices rising by 5.1p a litre between August and September.
The biggest drivers of disinflation last month were food and drink prices, where inflation fell from 13.6 per cent to 12.2 per cent, and inflation in furniture and household goods, which dropped from 5.1 to 3.7 per cent on an annual basis.
Last month the Bank of England kept borrowing costs steady for the first time since November 2021, citing falling inflation and a slowing labour market as reasons not to raise interest rates again. The Bank’s ratesetters have said they are still closely watching developments in wage growth to judge whether more monetary tightening is required. The monetary policy committee meets again on November 2.
Financial markets are expecting at least one more rate rise this year, causing the base rate to peak at 5.5 per cent from 5.25 per cent at present.
One of the Bank’s preferred measures of inflation in the services sector remained high last month, rising slightly from 6.8 per cent to 6.9 per cent, the ONS said.
Responding to the inflation figures, Jeremy Hunt, the chancellor, said: “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. Today’s news just shows this is even more important so we can ease the pressure on families and businesses.”
Paul Dales, chief UK economist at Capital Economics, said: “The failure of CPI inflation to fall in September from August’s 6.7 per cent will be a bit of a disappointment to most. [But] it is still below the 6.9 per cent rate the Bank of England projected in August.”
Dales said he did not expect the Bank to raise interest rates again. He said inflation still remained on track to fall below 5.1 per cent by December as the chancellor pledged. “The new risk, though, is that events in the Middle East restrain how far inflation falls next year,” he added.