Surprising drop in inflation for September

The Office for National Statistics (ONS) have reported that their measure for inflation (Consumer Prices Index) fell to 1.7% for September. This is an unexpected reduction and is the lowest inflation has been in more than three years.


Drops in airfares and petrol were the main reasons for the reduction. The Bank of England targets 2% inflation, so this reduction may allow them to cut interest rates further when they meet in November. There is also some expectation that there could now be a second rate cut in December.


The September inflation figure is an important one since it’s normally used to set how much many benefits increase next April. These include Universal Credit, disability benefits, and carer’s allowance. Lower inflation may lead to lower increases in these allowances.


The drop in inflation may be temporary though, as energy prices increased in October, which may swing the picture once again.


See: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest