The UK CPI read for September 2024 as reported by the Office of National Statistics came in at 1.7%, which was below the Bank of England’s 2% target, and lower than analysts had been expecting. The BOE had estimated at 2.1% back in August. On a monthly basis, CPI was little changed in September 2024, down from a rise of 0.5% in September 2023.
The largest downward contribution to the monthly change in the CPI annual rates came from transport, with larger negative contributions from air fares and motor fuels; the largest offsetting upward contribution came from food and non-alcoholic beverages.
Services inflation in particular fell significantly thanks to air fares and hotel accommodation being cheaper, coming in at 4.9% compared to the 5.2% read which was expected.
This all but locked a further rate cut from the Bank of England when the Monetary Policy Committee next meets. The September read is also used to set the uplift in benefits next spring.
The UK Pound slipped against the USD, while yields on both the 2-year and 10-year gilts moved lower.
Overall inflation may be down, for now, but the pace of food price increases rose for the first time since early last year while the costs associated with living in your own home grew at the fastest since 1992. For homeowners and those looking to get a mortgage, therefore, the prospects of lower interest rates will certainly be welcome. But the Bank of England will continue in cautious mode, as they expect inflation to pick up again in the months to come.
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