UK inflation held steady at 3.8% in September, defying expectations of a rise. This matches the August figure, with forecasts anticipating a climb to 4%. Inflation reflects the average 4% increase in prices over the past year for goods and services.
The Office for National Statistics (ONS) reports monthly inflation data. Transport costs, driven by stable petrol and airfare prices compared to the previous year, were the primary factors in maintaining the 3.8% inflation rate. Conversely, food and non-alcoholic drink prices decreased, along with ticket prices for live events.
September’s inflation rate is crucial for determining adjustments to state pensions and welfare benefits next April. The “triple lock” mechanism ensures state pensions increase annually based on the highest of earnings growth between May and July, September inflation, or 2.5%. As wage growth for May to July outpaced September inflation at 4.8%, it will be used to calculate next year’s state pension increase.
Grant Fitzner, ONS Chief Economist, noted that stable inflation in September was influenced by various price movements. While petrol and airfares slightly eased in price compared to last year, there were reductions in recreational and cultural expenses like live events, as well as food and drink costs.
Chancellor Rachel Reeves expressed dissatisfaction with the inflation figures, emphasizing the need for economic improvement to benefit the public. Inflation serves as a gauge for price escalations, where a 4% inflation rate signifies a £1 item from the previous year now costing £1.04.
The ONS computes inflation based on a representative “basket of goods” regularly purchased by households. The headline inflation figure represents an average, meaning individual prices may vary. The Bank of England targets a 2% inflation rate and adjusts interest rates to manage inflation levels. Despite interest rate adjustments, inflation has fluctuated, peaking at 11.1% in October 2022 due to higher energy and food costs.
Following a decrease to 1.7% in September 2024, inflation has since begun to rise again, indicating ongoing economic shifts.
