With a slowdown in prices of food and beverages, UK’s inflation remained at 6.7% in September
According to official numbers released on Wednesday, the UK's inflation rate stayed at 6.7% in September amid a slowdown in price increases for food and beverages and an increase in petrol costs for drivers.
The Office for National Statistics' flat reading was disappointing because most analysts had anticipated another dip, although a minor one.
Inflation rate in UK is still 3 times than the target rate
This indicates that the UK's inflation rate is still more than 3 times greater than the Bank of England's 2% target rate. At its upcoming policy meeting in early November, the bank doesn't expect to raise interest rates; instead, it may decide to leave its main borrowing rate constant at the 15-year high of 5.25%.
The bank ended nearly two years of interest rate increases last month as inflation declined from multi-decade highs above 11%. The majority of economists anticipate a substantial drop in inflation next month.
For at least one month, the rate of declining inflation has paused, according to James Smith, research director at the Resolution Foundation think tank. According to official numbers released on Wednesday, the UK's inflation rate stayed at 6.7% in September despite a slowdown in price increases for food and beverages and an increase in petrol costs for drivers.
The bank ended nearly two years of interest rate increases last month as inflation declined from multi-decade highs above 11%.
The majority of economists anticipate a substantial drop in inflation next month.
For at least one month, the rate of declining inflation has paused, according to James Smith, research director at the Resolution Foundation think tank. “It should fall sharply to below 5% next month as energy prices drop for the vast majority of customers.
Interest rates were raised to combat price rise due to supply chain issue
Like other central banks, the Bank of England rapidly increased interest rates from near zero in an effort to combat price increases that were initially sparked by supply chain problems during the coronavirus outbreak and subsequently by Russia's invasion of Ukraine, which increased the cost of food and oil.
Inflation has decreased globally as a result of higher interest rates, which restrain expenditure and cool the economy by making borrowing more expensive. Despite the fact that most economies have escaped recession, there are still concerns that the British economy may begin to see output decline in the coming months. This would not be the best situation for the ruling Conservative Party before a general election.
Among the Group of Seven top industrial economies, the UK has the highest inflation rate; the US, for instance, has a rate of 3.7%.
Britian's exit from European Union created shortage in few industries
That is attributed by some economists to Britain's exit from the European Union, which has increased prices for firms by causing personnel shortages in some industries and trade friction.
The flat reading will undoubtedly cause homeowners to worry that rates will continue to rise. Many homeowners and renters have not yet seen increases in their housing costs due to the lag between actual rate rises and mortgage rates.
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