The Canary Wharf business district is visible in the distance behind autumn leaves on October 9, 2024 in London, England.
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LONDON – Britain’s inflation rate fell sharply to 1.7% in September, the Office for National Statistics said on Wednesday.
Economists polled by Reuters had expected headline interest rates to rise to 1.9% this month, below the Bank of England’s 2% target for the first time since April 2021.
Inflation has hovered around this level for the past four months, with inflation at 2.2% in August.
Core inflation (excluding energy, food, alcohol and tobacco) was 3.2% this month, down from 3.6% in August and below the 3.4% forecast in a Reuters poll.
Price growth in the services sector, the dominant part of the British economy, slowed sharply from 5.6% in August to 4.9% last month and is now at its lowest level since May 2022.
Core inflation and services inflation are key observations for Bank of England policymakers as they consider whether to cut interest rates again at their November meeting.
As of Wednesday morning, markets were pricing in an 80% chance of a rate cut in November ahead of the latest inflation data. Analysts said on Tuesday lower wage growth reported by the Office for National Statistics this week supported the case for pay cuts. The Bank of England cut its key interest rate by 25 basis points in August and kept it unchanged in September.
fell on GBP Sterling fell 0.5% against the dollar to $1.301 on Wednesday’s news suggesting the Bank of England’s outlook was more dovish, while sterling fell 0.38% against the euro.
“These figures give us confidence that the UK has moved into a more benign inflationary environment, helped by lower fuel prices,” Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said in a report. Industry inflation suggests “underlying price pressures are becoming less sticky.”
Still, Thiru added that UK inflation is likely to reverse its downward trend in October due to higher caps on energy prices set by regulators, while the Bank of England will wait to review the UK Labor government’s much-anticipated first budget at the end of the month to find out. any potential possibilities.
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