According to the latest data released today, UK inflation held firm at 3.8% in September. According to the Office for National Statistics (ONS) this is the third month in a row with 0% growth. This 3.5% figure caught many in the analyst community completely flat-footed, most expecting the figure to jump up to 4%. While inflation is still being notoriously sticky above the 2% government target, this uncertain environment has raised concerns about the broader economic landscape and its impact on Americans across the country.
The September Consumer Price Index (CPI) rate is about much more than the numbers. This indeterminate change has direct repercussions for benefit upratings—meaning that those on universal credit and state pensions are directly impacted. Next month Rachel Reeves, the new Chancellor of the Exchequer will unveil her budget. This budget will address the uprating decisions head on. Until then, there will be no decision on benefit changes.
Even with inflation holding constant, the nation’s central government is still trying to manage pressure from rising transit and food costs. Transport costs jumped 3.8% YOY, the biggest increase since the 2.4% annual rate in August. On the plus side, there was a small reprieve for year-over-year food price inflation, which fell to 4.5% from 5.1% in August. Food prices fell by 0.2% month-on-month – the first time since last May last year that food prices have recorded a month-on-month decrease.
On the same day, the ONS commented that RPI inflation for September was 4.5%. This figure adds another layer of complexity to the economic landscape as Rachel Reeves prepares to unveil her budgetary plans. This is welcome, as the Chancellor has already clearly signalled his openness to lower benefit increases. This initiative is the latest in her plan to address inflationary pressures.
“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. That needs to change. All of us in government are responsible for supporting the Bank of England in bringing inflation down.” – Rachel Reeves
Given ongoing uncertainty in the inflation backdrop, sentiment regarding the Bank of England’s monetary policy is guarded. The Federal Reserve, the nation’s central bank, will meet next on November 6. Indeed, analysts seem to agree that the Fed should keep rates steady this go-round. The last meeting of 2025 will be held on December 18. In this convening, we’ll take a deep look at the state of our economy.
The upcoming budget announcement from Rachel Reeves is expected to address a range of policies aimed at alleviating some financial burdens faced by citizens. She did stress that we need to focus on making solutions available that help households of all incomes better manage their costs.
“We will bear down on some of the costs that people face.” – Rachel Reeves
The magnitude of any state pension increase will be determined by the annual reading on wage growth. That means it must reach 4.8% for the three months through the end of July – not counting any special one-time bonuses. Surely the government cannot be serious about protecting pensioners from the harms of spiking inflation. This commitment is even further underscored by their “triple lock” pledge.
September’s inflation data underscores an increasingly dire challenge for federal policymakers. The Federal government is now facing immense pressure to adopt solutions that can lead to stabilized cost-of-living pressures and stimulate long-term economic growth. The upcoming budget will be pivotal in shaping the fiscal landscape and addressing the needs of UK households grappling with rising expenses.