(CTN News) – As official data showed on Wednesday, the annual consumer price inflation (CPI) in Britain held at an 18-month low of 6.7% in September, beating economists‘ expectations that it would decline further in the following months.
It was expected that the Bank of England would leave interest rates at 5.25% on Nov. 2. The Bank had kept them on hold in September, after an unexpected decline in the August inflation rate had occurred the day before it announced its decision.
The value of the pound rose slightly after the data was released, which increases the probability of a further increase by the Bank of England.
Earlier this week, the government released data showing that core inflation – which excludes volatile food, energy, alcohol and tobacco prices, and has been thought to give a better indication of underlying price trends – fell less than expected to 6.1% in September, down from 6.2% in August.
There was an increase in the inflation rate of services prices in September from 6.8% to 6.9%, another component of the CPI that the BoE studies.
It is estimated that British inflation hit a 41-year high of 11.1% in October 2022, following a spike in European energy prices as a result of Russia’s invasion of Ukraine, adding to pressures imposed by supply chain difficulties and labour shortages following the COVID-19 pandemic.
According to its last set of forecasts released in August, the Bank of England predicted that inflation would remain above its 2% target until the beginning of 2025.
It is no secret that the British government is keenly watching inflation as well, as Prime Minister Rishi Sunak made a pledge to halve it at the beginning of the year, and the result is that many households have seen their standard of living fall as wages have been unable to keep up with rising prices.
“As we have seen across the G7 countries, inflation rarely falls in a straight line, but if we adhere to our plan, we still expect it to continue falling this year,” said finance minister Jeremy Hunt following the release of the data.
According to the figures for September, the inflation rate for consumer prices in the British economy remains at the highest level of any major advanced economy, with France and Italy coming in second and third with rates of 5.7% and 5.6%, respectively.
After a 0.5% drop in August, producer prices, which are what manufacturers charge wholesalers and retailers for the products they manufacture, fell by a 0.1% annual decline in September after a 0.5% decline in August.