UK inflation held steady at 3.8% in September, defying expectations of a rise. This matches the August figure, with experts and the Bank of England anticipating a climb to 4%.
Inflation measures the change in prices of goods and services over time, indicating that prices are now, on average, 4% higher compared to a year ago. The Office for National Statistics (ONS) attributes the stable inflation rate to transport costs, primarily driven by sustained petrol and airfare prices.
Conversely, the cost of food, non-alcoholic beverages, and tickets for live events decreased. September’s inflation data is crucial as it influences adjustments to state pensions and welfare benefits the following April.
The “triple lock” mechanism ensures the state pension rises yearly based on the highest value among earnings growth between May and July, September inflation, or 2.5%. With wage growth at 4.8% for May to July surpassing September’s inflation, pension adjustments will align with this figure next year.
Grant Fitzner, ONS Chief Economist, noted that varied price movements led to unchanged inflation in September. While petrol and airfares increased, prices for recreational and cultural activities, and food and beverages decreased.
Chancellor Rachel Reeves expressed dissatisfaction with the inflation rate, emphasizing the need to address economic stagnation and support individuals facing rising living costs. Inflation, as a measure of price rises, impacts consumer purchasing power, with lower rates indicating slower price increases.
The ONS calculates inflation based on a basket of goods and services reflecting consumer spending habits. The headline inflation figure represents an average, with individual goods potentially deviating from this average.
The Bank of England aims for 2% inflation, using interest rate adjustments to manage inflation levels. Higher rates discourage borrowing, reducing spending, and ultimately lowering demand and prices. The base rate fluctuated from 0.1% in December 2021 to 5.25% in August 2023, before recent cuts to 4%.
Inflation spiked to 11.1% in October 2022, driven by energy and food costs. Factors like increased energy demand post-Covid and the Ukraine conflict contributed to rising prices. In September 2024, inflation hit a three-year low at 1.7% but began to rise again in October.
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