Britain’s consumer inflation rate remained unchanged at 6.7% in September, despite the pace at which food prices are rising slowing for a ninth straight month, according to Britain’s main statistical agency. This information was announced on Wednesday. The Office for National Statistics revealed that the reduction in food inflation was offset by the rate at which motor fuel prices fell in September, resulting in a decline of 9.7% compared to a 16.4% drop in August.
The Chief Economist of the Office for National Statistics, Grant Fitzner, stated in a post on X, “Food and non-alcoholic drinks prices eased again across a range of items with the cost of household appliances and airfares also falling this month. These were offset by rising prices for motor fuels and the cost of hotel stays.”
In September, food and non-alcoholic drinks inflation slowed by an annual 12.1%, down from 13.6% in August. However, the monthly rate fell for the first time in two years, with prices decreasing by 0.2% compared to September 2022 when they rose by 1.1%. Services inflation slightly accelerated, rising by 0.1 to 6.9%, but the overall inflation rate remains at its lowest level since the sharp price increases following Russia’s invasion of Ukraine in February 2022.
The Office for National Statistics noted that closely watched core inflation, which excludes the price movements of volatile items such as food, alcohol, tobacco, and energy, fell by 0.1% to 6.1%. This decrease was driven by a slowdown in the cost of many goods.
In August, inflation unexpectedly fell to 6.7% from 6.8% in July, as the pace at which food prices rose slowed down despite increasing energy prices. The decrease in inflation was limited to 0.1% due to the “large downward effects” of decreasing prices in restaurants and hotels, food and non-alcoholic drinks, recreation and culture, and furniture and household goods. However, these decreases were counterbalanced by rises in gasoline, alcohol and tobacco, and communication costs.
Analysts predict that the inflation situation will present a dilemma for the Bank of England’s Monetary Policy Committee during its upcoming meeting on November 2. The committee will have to decide whether to cut, hold, or hike interest rates from the current 5.25% level in line with the central bank’s 2% inflation target. Hiking rates risks stifling the little economic growth present, while holding or cutting rates could lead to embedded inflation, especially with wage growth in Britain currently running at an above-inflation rate of 7.8%.
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