UK inflation remained unchanged at 3.8% in September, marking the third consecutive month at the same level, according to the Office for National Statistics.
The figure came in below analysts’ expectations of 4%, as higher transport costs were offset by cheaper food and a slowdown in recreation and culture prices.
While the stable reading offers a small sigh of relief for Chancellor Rachel Reeves ahead of next month’s crucial Budget, experts caution that headline inflation remains stubbornly above the Bank of England’s 2% target.
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Scott Gardner, investment strategist at Nutmeg, said: “September’s inflation defied expectations, but core and services inflation remain elevated. Combined with persistent wage growth and the April hike to employer National Insurance contributions, the UK economy faces ongoing cost pressures. A fourth rate cut this year now looks unlikely unless the labour market weakens significantly.”
Chris Beauchamp, Chief Market Analyst at IG, echoed the cautious optimism: “While inflation is still almost double the BoE’s target, the flat reading provides a small glimmer of hope ahead of the Budget. Core CPI even slowed for a second month, though policymakers will need more evidence that price growth has peaked.”
Nathaniel Casey, investment strategist at Evelyn Partners, noted that the softer CPI reading may mark the peak of the current inflation cycle, offering some relief for welfare uprating and the state pension triple lock. However, he added that inflation remains high enough to leave markets largely unchanged on rate expectations.
Kevin Brown, savings expert at Scottish Friendly, highlighted the real-world challenges: “While flat inflation is positive on paper, many families are still struggling after years of rapid price increases. September’s reading is unlikely to prompt further MPC rate cuts this year, meaning borrowers may not see mortgage rates drop. Savers should shop around for better deals or consider longer-term investments to protect against inflation.”
Kris Brewster, Director of Retail Banking at LHV Bank, advised households to make their money work harder: “Now is not the time to leave cash idle. Interest-paying current accounts and competitive savings products can help protect against inflation and deliver real returns on deposits.”
Luke Bartholomew, Deputy Chief Economist at Aberdeen, suggested the inflation outlook is slightly less concerning than a few weeks ago: “Wage growth is moderating, and technical factors may have helped keep CPI flat. A November rate cut may still be too soon, but prospects for easing in December have increased.”
Derrick Dunne, CEO of YOU Asset Management, warned that while CPI staying below 4% is encouraging, three months of flat inflation underlines persistent price pressures and the challenges facing government borrowing and fiscal policy. “High inflation reinforces the cost of debt, making tax hikes more likely and creating a vicious cycle for households and the economy,” he said.
