Inflation fell below the two per cent target for the first time since April 2021, new figures show, in a further boost for hopes that the Bank of England will cut interest rates next month.
The consumer price index fell to 1.7 per cent in September, according to the Office for National Statistics (ONS), down from 2.2 per cent in August.
This was a bigger fall than economists had expected. City traders had expected inflation to fall to 1.9 per cent in September.
Core inflation, which strips out volatile components such as food and energy, fell to 3.2 per cent, also below expectations and down from 3.6 per cent the month before.
September’s inflation figures come a day after official data showed a further easing in wage growth, which bolstered bets that the Bank would cut interest rates again in November.
The Bank cut interest rates for the first time since the pandemic in August, but left rates on hold last month citing concerns about the persistence of inflation. This means the benchmark Bank Rate stands at five per cent.
Divisions have deepened in the Bank about the appropriate path for policy, with Governor Andrew Bailey suggesting he might back a more “activist” approach if inflation continues to moderate.
In contrast, Huw Pill, the Bank’s chief economist, has said there was “ample reason for caution” on interest rates.
Although inflation has fallen below the two per cent target, the Bank’s forecasts suggest that it will rise over the remainder of the year to just under three per cent.
More to follow