In September, UK inflation held steady at 3.8%, defying expectations of a rise. This matches the August figure, contrary to predictions of a climb to 4%. Inflation tracks the price changes of goods and services, indicating that prices are now, on average, 4% higher than a year ago.
The Office for National Statistics (ONS) reports monthly inflation data. Transport costs, driven by petrol and airfare prices that did not drop as much as the previous year, were the main factors keeping inflation at 3.8%. Conversely, prices for food, non-alcoholic drinks, and live event tickets decreased.
September’s inflation rate is crucial for determining adjustments to state pensions and welfare benefits in April. The state pension is adjusted annually based on the highest of earnings growth, September inflation, or 2.5%. With wage growth at 4.8% for May to July surpassing September inflation, it will determine the state pension increase next year.
Grant Fitzner, ONS Chief Economist, noted that inflation remained unchanged due to varied price movements. Petrol prices and airfares contributed to the stagnation, while recreational and cultural purchases, including live events, experienced price drops. Additionally, food and non-alcoholic drink prices decreased for the first time since May last year.
Chancellor Rachel Reeves expressed dissatisfaction with the numbers, emphasizing the need for economic improvement to benefit working individuals. Inflation, representing price increases, serves as a barometer for rising costs. The ONS calculates inflation based on a basket of goods and services reflecting household expenditures, with the headline inflation figure serving as an average.
The Bank of England targets 2% inflation, adjusting interest rates to mitigate inflationary pressures. The base rate, which peaked at 5.25% in August 2023, has since been reduced to 4%. Inflation surged in 2021, reaching 11.1% in October 2022, driven by higher energy and food costs post-Covid and exacerbated by the Ukraine conflict.
After hitting a three-year low of 1.7% in September 2024, inflation began to rise again in October. The Bank’s efforts to control inflation aim to balance economic growth and affordability for consumers while maintaining price stability.
