Increased fuel prices prevented a decline in UK inflation in September

According to official statistics released on Wednesday, British consumer price inflation (CPI) remained at an 18-month low of 6.7% in September, defying experts' predictions for a further decrease and boosting the probability of a further increase in interest rates.

Financial markets still anticipate the Bank of England to maintain interest rates at their current level of 5.25% on November 2 after it did so in September as a result of an unexpected decline in the August inflation rate the day before it made its announcement.

But once the Office for National Statistics released its numbers on Wednesday, the value of the pound increased. These revealed that the annual CPI rate, which experts had anticipated to decline to 6.6%, was under pressure to increase due to an increase in gasoline prices between August and September.

Based on numbers revealed earlier today, core inflation, which excludes volatile prices for food, energy, alcohol, and tobacco and is frequently thought to provide a clearer indication of underlying price trends, decreased less than anticipated to 6.1% in September from 6.2% in August.

The BoE also analyses the CPI component for services, which increased from 6.8% to 6.9% in September.

Following the rise in European energy costs as a result of Russia's invasion of Ukraine in October 2022, which added to pressures from supply chain issues and workforce shortages as a result of the COVID-19 pandemic, British consumer price inflation reached a 41-year high of 11.1%.

The Bank of England forecasted that through the beginning of 2025, inflation will remain over its 2% objective.

After Prime Minister Rishi Sunak promised to halve inflation at the beginning of this year, the British government is also closely monitoring the issue. Many people have seen their quality of living decline as incomes have struggled to keep up with costs.

"As we have seen across other G7 countries, inflation rarely falls in a straight line, but if we stick to our plan then we still expect it to keep falling this year," said Finance Minister Jeremy Hunt following the release of the statistics.

With rates of 5.7% and 5.6%, respectively, for September, France and Italy were the Group of Seven advanced economies' closest competitors to Britain in terms of consumer price inflation.

To conclude, following a 0.5% annual decline in August, producer prices, which manufacturers charge wholesalers and retailers, decreased by 0.1% in September.

(Sources: investing.com, reuters.com)