UK inflation held steady at 3.8% in September, defying expectations of a rise. This matches the August figure, with many experts anticipating a climb to 4%. Inflation reflects the average 4% increase in prices compared to a year ago.
The Office for National Statistics (ONS) reported that transportation costs, specifically petrol and airfare prices, maintained inflation at 3.8% by not dropping as significantly as the previous year. Conversely, food and non-alcoholic beverage prices decreased, alongside live event ticket prices.
The September inflation rate is crucial as it influences the adjustment of state pension and welfare benefits next April. The state pension is annually increased based on the highest of earnings growth between May and July, September inflation, or 2.5%. With wage growth at 4.8% from May to July exceeding September inflation, this rate will determine the state pension increase for the upcoming year.
Grant Fitzner, Chief Economist at ONS, noted that various price shifts balanced out to maintain unchanged inflation in September. While petrol and airfares drove prices up, recreational and cultural purchases, including live events, experienced price drops. Food and non-alcoholic drink costs also declined for the first time since May last year.
Chancellor Rachel Reeves expressed dissatisfaction with the current numbers, emphasizing the need for economic improvement to address the cost of living challenges. Inflation signifies the rise in prices, exemplified by a 4% inflation rate increasing a £1 item to £1.04 from the previous year.
The ONS tracks inflation by monitoring a basket of goods and services that reflects consumer spending habits. The headline inflation figure represents an average, with some individual prices deviating from this figure. The Bank of England targets a 2% inflation rate, having adjusted interest rates to curb inflation, impacting borrowing costs and consumer spending.
Inflation surged in 2021, peaking at 11.1% in October 2022, driven by escalating energy and food prices. Post-Covid energy demand rose, exacerbated by the Ukraine conflict, leading to increased food costs. In September 2024, inflation hit a three-year low at 1.7% before gradually rising again in October.