UK inflation falls to lowest level in over 3 years, cementing expectations for another rate cut
Inflation in the U.K. has fallen to its lowest level in more than three years, a drop that has cemented market expectations that the Bank of England will lower interest rates at its next policy meeting
LONDON — Inflation in the U.K. has fallen to its lowest level for more than three years, official figures showed Wednesday, a drop that has cemented market expectations that the Bank of England will lower interest rates at its next policy meeting in November.
The Office for National Statistics said consumer prices rose 1.7% in September, down from 2.2% the previous month, largely as a result of lower air fares and petrol prices. But price pressures were lower across the board, even in the services sector, which has worried policymakers as it accounts for around 80% of the British economy.
The decline was bigger than the 1.9% analysts had anticipated, and means that inflation is below the central bank's target rate of 2% for the first time since 2021.
As a result, the bank's rate-setting panel is expected to further reduce its main interest rate when it meets again in early November to 4.75% from 5%. It previously cut borrowing costs in August, the first reduction since the early days of the coronavirus pandemic in early 2020.
“A quarter-point rate cut in November is now effectively a done deal, and this report certainly makes the path to a consecutive cut in December much clearer,” said Luke Bartholomew, deputy chief economist at abrdn, formerly Aberdeen Asset Management.
Central banks around the world dramatically increased borrowing costs from near zero during the coronavirus pandemic when prices started to shoot up, first as a result of supply chain issues built up and then because of Russia’s full-scale invasion of
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