In the UK, the inflation rate was unchanged at 3.8% in September 2023. This is a sign of a stabilizing economy, but significant work remains on the road ahead. Rachel Reeves, the Chancellor of the Exchequer, expressed her dissatisfaction with the current figures, emphasizing that the economy feels stagnant. Over the last year, the inflation rate has dropped sharply from a high of 11.1% in October 2022. That peak was the highest we’ve experienced in over 40 years.
Indeed, inflation, in recent months at least, has begun to ease. Indeed, the rate of inflation for food and non-alcoholic beverages fell to 4.5% for the year ending in September. That’s an increase from the 5.1% rate that was reported in August. This represents the lowest pace of food price inflation in more than a year. This is exactly like the Bank of England, which has a 2% inflation target. This ambitious target brings focus to how important these numbers are to actual policymakers and consumers.
Chancellor Rachel Reeves commented on the economic landscape, stating, “I am not satisfied with these numbers. For too long, our economy has felt stuck, with people feeling like they are putting in more and getting less out.” She pointed out that millions of people are facing crisis-level bills and cost-of-living pressures now. Reeves continued to stress the importance of providing more economic opportunity and establishing an economic climate that is advantageous to people who work.
The inflation numbers over each of the last three months have been some of the joint-highest quarters since January 2024. Keeping the lid on the overall inflation headline number is critical. Millions of people who depend on these benefits are about to get a 3.8% bump in their checks next year.
More broadly, inflation has varied wildly in recent years. As of January 2020, the unemployment rate was 1.8%. By late that year, it almost dropped to 0% due to a confluence of economic pressures. The new rate of 3.8% matches those of this July and August of 2023.
Grant Fitzner, Chief Economist at the Office for National Statistics (ONS), noted that “the largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year.” He claimed that these raises were offset by decreased costs in leisure and culture such as live shows.
Mel Stride, Secretary of State for Business and Industrial Strategy, criticized the government’s handling of inflation, asserting that national insurance increases and government borrowing contributed to rising costs. He articulated concerns that these measures were “pushing up the cost of living and punishing those Labour promised to protect.”
The numbers being reported paint a confusing economic picture with contradictory forces at work lowering inflation in some areas and raising it in others. Though food prices have started increasing at a decelerating rate, other inflationary forces are still pressing on households.