September inflation holds at 3.8%

September saw inflation remain at 3.8%, new Consumer Price Index data from the Office of National Statistics (ONS) has shown.

The slowdown in the rate of price rises falls in line with economists’ expectations that inflation will be peak in Autumn 2025, before gradually falling back towards the Bank of England’s 2% target rate.

The ONS highlighted that food and drink prices, which had been the main drivers of higher inflation in recent months, had begun to see less steep increases in September. Data also suggested that the inflationary pressure of rises in Employer National Insurance Contributions and the National Living Wage, which took effect in April, are also easing.

With inflation showing initial signs of falling in line with Bank of England forecasts, the latest ONS data strengthens the arguments for the Bank’s Monetary Policy Committee to cut interest rates again when they meet on 6th November, after holding rates at their current level in September. Signs of a turnaround in inflation data may also boost confidence in the UK economy ahead of Chancellor Rachel Reeves’ upcoming Budget at the end of November.

While inflation in the UK has been trending upwards over the past 12 months, this pattern is not being seen in other major European economies, with the EU average rate of inflation having remained below the UK’s rate since December 2024, and currently stands at 2.6%, with the bloc’s largest economies, Germany and France recording inflation figures of 2.4% and 1.1% respectively in September.