U.K. inflation unexpectedly remained unchanged at 3.8% in the year to September, as rising fuel costs were balanced by falling food prices, official data showed Wednesday, fueling hopes of another interest rate reduction next month.
The Office for National Statistics reported that the consumer price index held steady from the previous two months, defying economists’ expectations of a rise to 4%, double the Bank of England’s target. Analysts said the flat reading suggests inflation may have peaked and could gradually return toward target levels in the coming months.
Martin Sartorius, principal economist at the Confederation of British Industry, said price pressures should ease slowly, though a significant decline may not occur until the first half of next year. He added the “downside surprise” increases the likelihood of a rate cut at the Bank of England’s next policy meeting on Nov. 6.
Treasury chief Rachel Reeves is also expected to welcome the figure ahead of the Nov. 26 budget, as September’s inflation rate influences welfare benefit adjustments, reducing funding costs compared with earlier expectations.