UK inflation holds steady for September after Bank of England pauses rate hikes

LONDON — U.K. inflation came in at 6.7% in September, slightly ahead of expectations and unchanged from the previous month.

On a monthly basis, the headline consumer price index increased by 0.5%, in line with expectations. Economists polled by Reuters had projected an annual rate of 6.6% and a monthly climb of 0.5%.

The largest downward contributions came from food and non-alcoholic beverages, whose prices fell month-on-month for the first time since September 2021, the Office for National Statistics said Wednesday. Rising fuel prices made the largest upward contribution to the headline rate.

Core CPI — which excludes volatile food, energy, alcohol and tobacco prices — came in at 6.1% year-on-year, down from 6.2% in August, but slightly above a consensus projection of 6%.

“As we have seen across other G7 countries, inflation rarely falls in a straight line, but if we stick to our plan then we still expect it to keep falling this year,” U.K. Chancellor of the Exchequer Jeremy Hunt said in a statement.

“Today’s news just shows this is even more important so we can ease the pressure on families and businesses.”

For August, the U.K. consumer price index surprised with a dip to 6.7%, below expectations, which sparked the Bank of England to end a run of 14 straight interest rate hikes.

The bank had been hiking rates consistently since December 2021 in a bid to rein in inflation, taking its main policy rate from 0.1% to a 15-year high of 5.25% in August.

The market is pricing around a 77% chance that the Bank holds rates steady again at its next meeting on November 2nd.

‘Higher for longer’ interest rates

Marcus Brookes, chief investment officer at Quilter Investors, said that the U.K.’s “slow and steady” path back towards the Bank of England’s 2% inflation target was unlikely to accelerate any time soon.

“With geopolitical tensions rising, energy…