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U.K. inflation remained unchanged in September, easing pressure on the Bank of England (BoE) ahead of its November policy meeting, although the rate still sits nearly double the central bank’s target.
According to data from the Office for National Statistics (ONS), annual CPI rose 3.8%, matching readings from July and August, and below forecasts for a 4.0% rise. The monthly rate was flat, compared with a 0.3% gain in August, signaling that price pressures have not intensified further.
Core Inflation and Policy Implications
Core CPI, which excludes volatile items like food and energy, rose 3.5% annually, down slightly from 3.6% in August, and was also flat on a monthly basis.
The numbers suggest that inflationary momentum has slowed, providing some comfort to BoE policymakers who have struggled to bring inflation closer to the 2% medium-term goal.
At its September meeting, the BoE kept interest rates steady at 4%, the lowest in more than two years, after a gradual easing from the 4.75% level seen at the start of 2025. BoE Governor Andrew Bailey cautioned that the U.K. was “not out of the woods yet”, emphasizing that any rate cuts would need to be gradual and carefully timed.
Upcoming Policy and Fiscal Developments
The next BoE interest rate decision is scheduled for November 6, and while another rate cut had been expected earlier, the recent inflation stability may prompt a more cautious stance.
Additionally, Chancellor Rachel Reeves is due to announce her Autumn Budget on November 26, with widespread expectations of tax increases and spending cuts to address a fiscal gap estimated at £40 billion.
Government data showed public borrowing reached £99.8 billion in the first half of the fiscal year—£7.2 billion higher than the forecast set in March—raising concerns about the U.K.’s fiscal position.
The Office for Budget Responsibility (OBR) is also expected to issue a sharp downgrade to growth forecasts, underscoring the delicate balance between fiscal consolidation and monetary flexibility as the U.K. economy navigates slow growth and persistent inflation pressures heading into 2026.
