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Britain’s inflation rate fell more than expected in September to a three-year low of 1.7%, raising the possibility that the Bank of England will cut further interest rates before the end of the year.
Data released by the Office for National Statistics on Wednesday shows inflation has fallen below the BoE’s 2% target for the first time since April 2021.
The annual rise in consumer prices was lower than the 1.9% predicted in a Reuters survey of economists and compared with 2.2% in August. This withdrawal was caused by lower airfares and gasoline prices.
The figures will be a boost for Sir Keir Starmer’s government just two weeks before a tough budget is due to include significant tax rises. Chancellor Rachel Reeves is aiming to close a £40bn funding gap, people close to the budget-making process said.
Core inflation was 3.2%, lower than economists’ expectations of 3.4%, and services inflation fell to 4.9% from 5.6%.
Immediately after the inflation data was released, the pound fell by 0.3% to $1.30.
Governor Andrew Bailey recently said that if inflation continues to fall, the rate setter will may become “a little more aggressive” in lowering borrowing costs, he said.
The central bank cut interest rates by a quarter of a percentage point in August. However, at the September meeting, the rate was left unchanged at 5%, and in November, the government suggested a further reduction.
Treasury Secretary Darren Jones said Wednesday’s inflation figures would be “welcome news for millions of families”, adding: “There is still work to do to protect working people.”
