Inflation in the year to September remained sticky, new figures have shown, in further evidence that the UK’s economic woes have deepened and hit Brits harder than those in other countries.
September was the third consecutive month that inflation hit 3.8 per cent, nearly double the Bank of England’s two per cent target.
Inflation has now also been on an upward trend over the last year when inflation was 2.3 per cent in the month of Rachel Reeves’ first Budget.
Core CPI inflation, which excludes food and energy prices, was 3.5 per cent, slightly below last month’s figure, while food price inflation was 4.5 per cent over the year.
“A variety of price movements meant inflation was unchanged overall in September,” said ONS chief economist Grant Fitzner.
“The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year.”
The ONS latest publication provided further confirmation that the UK is suffering from higher price growth than similar economies across the world.
The International Monetary Fund (IMF) and the OECD are two major global forecasters to predict that the UK will suffer from higher inflation than any G7 country over the next two years.
Sticky inflation rattles policymakers
Bleak forecasts, plus worrying trends on food prices and energy costs across Britain, have sharpened minds at both the Bank of England and the Treasury.
Monetary Policy Committee (MPC) members have clashed on whether they believe the UK was set to suffer from higher inflation for the foreseeable future.
Both chief economist Huw Pill and external member Catherine Mann have indicated they will opt for interest rates to be kept at four per cent at the next meeting in November given fears that price growth expectations remained elevated.
In a speech last week, Pill urged the Bank to change its guidance language to to cutting rates at a more “cautious pace”.
“While I would expect further cuts in Bank Rate over the coming year should the economic and inflation outlook evolve broadly as the MPC expects, it will continue to be important to guard against the risk of cutting rates either too far or too fast.”
Meanwhile, external member Alan Taylor has said struggles in the jobs market could send the UK into a recession, with lower interest rates necessary for the UK’s economy to bounce back and keep mid-term inflation levels under control.
Having voted for rates to be cut at steeper levels than other MPC colleagues, Taylor is seen as a more dovish member who has focused on the damage US tariffs and lower activity could have on supply in the UK economy.
High inflation levels since last year’s Budget has also put the Chancellor on edge given fears it could lead gilt traders to view the government’s economic planning in more unfavourable terms.
In Cabinet meetings, she has urged colleagues to focus on curbing the cost of living for Brits.
Labour ministers have also been tight-lipped on Budget plans as more reports have suggested the government could strip VAT from household energy bills later this year in an effort to lower inflation.