The latest data from the Office for National Statistics (ONS) revealed that U.K. prices maintained the same growth rate in September as they did in the previous month. This marks an end to the recent decline in inflation, primarily driven by the rise in services prices.
According to the consumer price index, which measures a broad range of goods and services prices, there was a 6.7% increase on a year-on-year basis. This figure remains consistent with August’s rate and surpasses economists’ expectations of a 6.6% rise, as reported by The Wall Street Journal’s survey. However, this development poses a challenge for the Bank of England in its ongoing efforts to combat inflationary pressures.
Prior to September, inflation had experienced a gradual easing trend over the past three months.
Grant Fitzner, the ONS Chief Economist, highlighted that while the cost of many goods experienced a slowdown, services prices did observe a slight rise. This contributed to the deceleration in the annual rate of core inflation for this month.
Core Inflation Eases in September
Core inflation, which excludes the volatile changes in energy and food prices, eased slightly to 6.1% in September, aligning with economists’ expectations. However, policymakers at the Bank of England (BOE) may have concerns about the rise in services inflation, which climbed to 6.9% in September from 6.8% in August. This increase could potentially keep overall price rises at elevated levels.
Wage Growth and Services Inflation
Figures released this week show that wage growth, a key driver of services inflation, slowed down in August but remains relatively high. The BOE faces a delicate balancing act as it aims to bring inflation closer to its 2% target, while avoiding pushing the economy into a recession. Last month, bank policymakers made the decision to maintain the benchmark interest rate at 5.25%, which is the first time in nearly two years that they have not raised rates.
Limited Concern for BOE
Jeremy Batstone-Carr, a strategist at Raymond James Investment Services, believes that the BOE should not be overly worried about September’s inflation rate. He suggests that the increase may have been influenced by both the conflict in the Middle East and the back-to-school season. Batstone-Carr does not anticipate a significant escalation of inflation or any major concerns for the Bank of England ahead of their next rate-setting decision.
Signs of Subsiding Inflation
Inflation is showing signs of continued subsiding in the upcoming months, according to experts. One significant factor contributing to this is the easing food inflation, which is expected to alleviate the pressure on shoppers’ wallets.
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