United Kingdom: Inflation drops to lowest level since April 2021 in September
Latest reading: Inflation came in at 1.7% in September, which was down from August’s 2.2% and below the Bank of England’s 2.0% target. September’s reading marked the weakest inflation rate since April 2021. The figure was primarily due to slower growth in prices for recreation and culture, plus a sharper decline in price pressures for transportation.
Meanwhile, core inflation fell to 3.2% in September from August’s 3.6%. Moreover, services inflation—a closely watched metric by the Bank of England—came in well below expectations.
Panelist insight: On the implications for monetary policy, Nomura analysts said:
“Services inflation momentum slowed sharply in September and the BoE has now been surprised considerably to the downside versus its forecast in the August MPR. However, the weakness in services inflation was driven in large part by airfares, which are a component that the BoE often looks through. The Bank of England […] still cannot claim victory over services inflation. Challenges remain, suggesting it can only cut once per quarter.”