Inflation static at 3.8% as easing food prices help tame peak

The rate of inflation remained static in September, according to official figures, which could raise prospects for interest rate cuts ahead.

The Office for National Statistics (ONS) had been expected by economists to reveal a figure of 4.1% - a level not seen since October 2023.

But the main consumer prices index (CPI) measure over the rolling 12-month period was held down by the first decline in food and non-alcoholic drinks prices since May last year, easing from 5.1% to 4.5%, and slowing costs for live events.

At 3.8%, however, the UK's inflation rate remains the highest in the G7 - which is made up of the UK, Canada, France, Germany, Italy, Japan and the US.

Money latest: What inflation hike means for state pension and rail fare increases

September's inflation figures don't just lay bare rising cost pressures on households and businesses currently.

They are also used to determine the uplift for the state pension in April.

Under the triple-lock mechanism, the pension payments are set to rise in line with earnings at 4.8% as the figure is running higher than the 3.8% rate of inflation and 2.5% minimum threshold.

ONS chief economist Grant Fitzner said of the big picture: "A variety of price movements meant inflation was unchanged overall in September.

"The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year.

"These were offset by lower prices for a range of recreational and cultural purchases including live events."

He added that the outlook for food was uncertain as factory gate price data showed rising costs.

While lower than expected, the CPI rate still remains almost double the Bank of England's target rate of 2%.

The most recent language out of the Bank's interest rate-setters had centred on the potential for elevated inflation to postpone prospects for more interest rate cuts.

Bank rate currently stands at 4%.

But the Bank and most economists expect inflation to have peaked, barring further economic shocks.

The contribution from energy is likely to fall sharply next month, despite a 2% rise in bills.

As such, LSEG data showed continued caution over the prospects for a November rate cut but a flurry of activity around December. Waiting will allow the Bank to see a further set of both employment and inflation figures.

Much will also depend on core and services inflation measures, also lower than expected today, continuing that trend.

These, along with pay growth rates, are crucial bits of information for the Bank to determine whether inflation is ingrained in the economy.

Private business surveys would suggest that its efforts to get inflation down may also be helped by subdued confidence in the economy ahead of the budget next month.

There are widespread fears of big tax rises ahead to fill a void, estimated at up to £30bn, in the public finances.

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Borrowing figures released on Tuesday showed government borrowing in the financial year to date £7.2bn above the level forecast by the Office for Budget Responsibility.

At the same time, tax receipts were up almost 10% in September compared to the same month in 2024.

Chancellor Rachel Reeves is being urged to act in a way that does not risk fanning the flames of inflation after businesses passed on higher employment costs imposed months after her first budget.

She said of the inflation data: "I am not satisfied with these numbers. For too long, our economy has felt stuck, with people feeling like they are putting in more and getting less out.

"That needs to change. All of us in government are responsible for supporting the Bank of England in bringing inflation down. I am determined to ensure we support people struggling with higher bills and the cost of living challenges, deliver economic growth and build an economy that works for, and rewards, working people."

(c) Sky News 2025: Inflation static at 3.8% as easing food prices help tame peak