Inflation holds steady at 3.8%: Experts respond

Food prices are increasing at their slowest rate in more than a year as inflation remained unchanged for the third month in a row.

The UK inflation rate remained stable at 3.8% in September, which was lower than expected, official figures show.

ONS chief economist Grant Fitzner noted that the cost of food and non-alcoholic drinks fell “for the first time since May last year” but the cost of items such as red meat and chocolate has continued to rise.

Chancellor Rachel Reeves said she was overall “not satisfied with the numbers” on inflation, while shadow chancellor Mel Stride said it was “pushing up the cost of living”.

The inflation rate for food and non-alcoholic drinks was down to 4.5% for the year to September from 5.1% in the year to August.

It means prices for shoppers are still going up, just more slowly – a small difference that might not always be easy to spot at the supermarket.

Inflation – “small glimmer of hope for the chancellor ahead of next month’s Budget”

Chris Beauchamp, Chief Market Analyst at IG: “While still almost double the BoE’s target, news of inflation holding steady provides a small glimmer of hope for the chancellor ahead of next month’s Budget. Core CPI even slowed for a second month, though policymakers will have to wait a little longer before making a bet that price growth has peaked.”

Inflation holds steady at 3.8% – Mortgage Advice Bureau reacts

Rachel Geddes, Strategic Lender Relationship Director, Mortgage Advice Bureau:

“While inflation holding steady at 3.8% reflects the persistent pressures from political uncertainty and elevated costs, the mortgage market continues to remain resilient. In fact, many don’t realise they’re now in a prime position to get onto the property ladder – especially compared to this time last year, or even six months ago.

“A ‘keep calm and carry on’ approach is needed here. While inflation remains well above the 2% target, the housing market remains in a strong place, and more aspiring buyers than ever are realising that they can get on the ladder sooner.

“Affordability is improving, and customers are benefiting from higher average borrowing limits and a wave of new, innovative products. First time buyer appetite is strong, with a 9.7% uplift on the number of mortgage applications year-to-date.

“Wherever you are in your homebuying journey, your first step should always be to speak to a broker. Their expertise will help you to navigate the market and secure a deal that sutis your current financial situation.”

Inflation hold ‘a glimmer of stability’ ahead of the Budget

• Positive market movements give Bank of England greater scope for policy manoeuvre, says Rathbones Investment Director
• Hold in rate a ‘modest but meaningful reprieve’ as fall in food inflation suggests pressure in key sectors might be easing

Commenting, Investment Director Isabella Galliers-Pratt said: “This morning’s CPI release delivered a modest but meaningful reprieve for policymakers and markets alike, defying expectations of a rise to 4.0% and offering a glimmer of stability ahead of the Chancellor’s Autumn Budget on 26 November.

“Although inflation remains nearly double the Bank of England’s 2% target, the absence of further acceleration will be welcomed in Whitehall, where fiscal pressures are mounting. The Treasury has faced scrutiny over its spending discipline following the reversal of planned cuts earlier this year. With growing calls for tax increases to restore balance, the Chancellor must now navigate a narrow path between fiscal credibility and economic support.

“The composition of the data adds further encouragement. Transport costs — notably impacted by the earlier rise in the national bus fare cap — were the largest upward contributor. However, this was offset by declines in food, recreation, and culture, sectors previously affected by the National Insurance contribution (NIC) increase, suggesting inflationary fears linked to corporate cost pressures may be easing.

“This aligns with broader macro signals: slowing money supply growth and signs of softening in the labour market both point to the possibility that the UK may be approaching, or past, the peak of this inflationary cycle.

“Markets responded positively this morning, with government bond yields edging lower and the FTSE moving higher, offering the Chancellor some breathing room given the UK’s substantial proportion of inflation linked debt. Lower inflation expectations help ease borrowing costs improving fiscal flexibility.  This backdrop also provides the Bank of England with greater scope for policy manoeuvre and may prompt speculation around a more dynamic path for the bank rate.

“In this context, the upcoming Budget may serve as a clearing event for UK assets. We continue to see scope for selective outperformance, particularly where valuations remain compelling, and policy clarity improves.”

UK inflation stays steady, but relief remains elusive

Lale Akoner, global market analyst, says: “UK inflation held at 3.8% in September, with easing food prices offsetting costlier fuel. While the data points to cooling pressures, inflation remains well above the 2% target, and the Bank of England is unlikely to cut rates in our view before seeing clearer disinflation. Growth momentum is already fading on continued weakness in retail sales, softer hiring, and sluggish business investment, suggesting the economy is flirting with stagnation.

“For households, the cost-of-living squeeze persists, as wage growth plateaus and mortgage costs stay elevated. Attention now turns to the autumn budget, where we think a fiscally disciplined support should be pursued to support households, focusing on housing affordability and energy costs without triggering inflation.

“For retail investors, a mix of stubborn inflation and sluggish growth argues for balance. In a low-growth, high-rate environment, portfolios tilted toward quality dividend payers and defensive sectors can offer stability. Global diversification also helps cushion domestic headwinds as the UK navigates a slower disinflation path. Inflation is not cooling fast enough to shift policy, leaving investors to navigate a slow grind rather than a sharp rebound.”