UK inflation holds at 3.8% for the third consecutive month

Headline CPI inflation held at 3.8% in September, a pace unchanged since July, in line with Cebr’s forecasts.

Overall, the picture for UK households is mixed. Food inflation slowed for the first time since March, from 5.1% to 4.5%, but prices for electricity, gas, and other fuels continued to rise, accelerating to 9.4% in September.

Divergent price pressures place the Bank of England at a crossroads.

With August’s data suggesting further loosening in the labour market, and hints of household support in the upcoming November Budget, the case for a rate cut in November is strong, but lingering price pressures complicate the decision. Cebr still expects one further interest rate cut before the end of the year.