UK inflation surprisingly dropped to 1.7% in the year to September, the lowest rate for over three years. As the Office for National Statistics has reported, such a drop is mainly because of cheaper airfares and cheaper petrol.
This leaves inflation at a level below the Bank of England’s 2%
Target and raises expectations for interest rate cuts this month. The September inflation rate is so important because it provides a base for rises in all benefits, from Universal Credit that will be topped up this April, to a 1.7% rise in benefits generally. This, however, is far from the forecast for state pensions, at an uprate of 4.1% as decided by the triple lock mechanism.
The biggest contributor here is the price cut on petrol and diesel
To a staggering 10.4% lower than last year’s equivalent month. Last but not least, air fares for both domestic and European routes, and for intercontinental journeys, have fallen sharply-going notably below when the peak summer travel periods will finally end.
Therefore, despite these indicators showing hope,
Households still face significant challenges, especially as food and beverage prices increasingly rise. The cost of staples such as milk, cheese, eggs, soft drinks, and fruits increased; thus, overall cost of living pressures continue to be an issue.
Chief Secretary to the Treasury Darren Jones
Described the fall in inflation as “welcome news for millions of families” but warned this still presents a case for continued economic stability and growth for working people.
The shock cut in inflation comes as the Government prepares for this month’s Budget, when Chancellor Rachel Reeves will present tax hikes and spending cuts worth around £40bn to navigate the fiscal landscape.
The outcome of these inflationary trends as well as government actions will be keenly watched as the UK looks to manage its economic future.