UK Inflation Holds Steady at 3.8% in September, Surprising Economists
British inflation and a key underlying measure of price growth held steady in September, defying expectations and offering a brief moment of relief for Finance Minister Rachel Reeves ahead of the upcoming November budget.
Official data from the Office for National Statistics (ONS) on Wednesday showed that the annual consumer price index (CPI) remained unchanged at 3.8% for the third consecutive month. Economists surveyed by Reuters and the Bank of England (BoE) had widely forecast a slight increase to 4.0%.
In the services sector, inflation also stayed flat at 4.7%, matching August levels and coming in below expectations of 4.9%. Following the report, the British pound (sterling) slipped against the U.S. dollar, reflecting investor uncertainty over future monetary policy.
Last week, the International Monetary Fund (IMF) projected that the UK will have the highest inflation rate among G7 economies in both 2025 and 2026. This outlook may hinder the Bank of England’s gradual efforts to lower interest rates and support a slowing economy.
The central bank expects inflation to ease further in the coming years but only reach its 2% target between April and June 2027. Meanwhile, Britain’s labour market continues to soften, and BoE policymakers remain divided on the level of lingering inflation pressure, as public inflation expectations have risen in recent months.
