Well there’s a surprise. All the doom and gloom news reports on Tuesday were shown to be wrong on Wednesday as UK annual consumer price inflation (CPI) for September didn’t come in at the predicted 4% but stayed at 3.8%, the same as in July and August.
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Economists (and the Bank of England) had been sure the figure would rise and deliver bad news for the Chancellor weeks ahead of her Autumn Budget statement.
That said, UK inflation will be the highest among the Group of Seven economies in 2025 and 2026, the International Monetary Fund said last week, which means progress on cutting interest rates is likely to stay slow.
There was good news on ‘core’ CPI (excluding energy, food, alcohol and tobacco) as it rose by 3.5% for September 2025, down from 3.6% for August.
Inflation isn’t expected by the Bank of England to hit the target 2% rate until Q2 2027.
In the latest month, transport was the biggest upwards driver and while clothing and footwear sales rose (and rose more than they had done the month before), they were well below the headline rate of inflation. August’s inflation rise in clothing and footwear had been 0.2% and for September it was 0.5%.
What did analysts think? Pieter Reynders, partner at McKinsey & Company, said: “Inflation continues its zig zag path, holding steady but significantly above the 2% target. Core inflation however was slightly below last month’s figure, which is a small but welcome step in the right direction.
“While consumer confidence is fragile, it is not absent. Our latest research finds that 71% of consumers plan to spend the same or more than last year on their 2024 holiday shopping, signalling that spending intentions are holding firm despite ongoing pressures.”
