Unexpected fall in inflation: Experts respond

UK inflation fell unexpectedly to 1.7% in the year to September, the lowest rate in three-and-a-half years

Lower airfares and petrol prices were the main drivers behind the surprise slowdown, official figures showed.

It means inflation – the rate prices rise at over time – is now below the Bank of England’s 2% target, paving the way for further interest rate cuts

Inflation falls: Pension expert reaction

 
Lily Megson, Policy Director at My Pension Expert, said, “Dropping to below target levels is a huge milestone in the fight against inflation, particularly after the sustained period of financial strain people have endured. Millions have seen savings like pension pots throttled by years of rising costs.

“Getting inflation under control has always been the priority in allowing savers to recover from the damage caused by prolonged price hikes. Yet, as we look ahead, savers must not become complacent. Now is the time to focus on rebuilding financial security through careful planning, and to ensure savings and investments are working as hard as possible to provide meaningful returns.

“Moving forward, the government and financial services sector must seize this opportunity to double down on financial education and make independent financial advice more accessible. Supporting people as they recuperate their losses in a post-inflation period will be key to ensuring that everyone can enjoy a more stable and comfortable financial future.”
 

Inflation: Against this difficult landscape, the BoE needs to balance a complex cocktail of factors before voting for more interest rate cuts – Rachel Winter, Killik & Co

 
Rachel Winter, Partner at Killik & Co, said: “The return to below-target inflation for the first time since 2021 suggests the Bank of England’s tactics have worked almost too well. But we should not take stability as a fait accompli – with the UK Budget and the US presidential election now less than a month away, market volatility in the short term remains likely. Both these events could affect the exchange rate between the pound and the dollar, and this could have an impact on UK inflation. The UK is heavily reliant on imports, and these imports become more expensive when the pound is weak, and cheaper when it is strong.
 

Expert comment: Inflation falls below target rate

 
Paul Noble, CEO of Chetwood Bank, said: “Inflation falling under 2% for the first time since April 2021 is welcome news for consumers. Not only does it allow for further respite from rising prices, but it also increases the likelihood that the Bank of England will cut the base rate again when it next meets on 7th November.

“If the base rate is cut next month, this will likely result in greater confidence and activity across the property market, with a reduced cost of borrowing increasing demand from prospective buyers. However, while these are important economic shifts, the other unknown is the exact contents of the Chancellor’s Budget, which is being delivered on 30th October.

“What we can say is that, with the macroeconomic climate changing and a raft of new policies expected in the Budget, it will be important for consumers and investors to take stock of their finances over the coming months. As a bank, our responsibility is to support customers through this period, ensuring our products cater to people’s evolving needs and supporting borrowers and savers to act with confidence.”

“Against this difficult landscape, the Bank of England needs to balance a complex cocktail of factors before voting for more interest rate cuts. For investors, the ongoing uncertainty underscores the need for a well-balanced portfolio. As volatility persists, diversification remains critical to mitigate risks from sector-specific disruptions.”
 

“Despite some positive coverage around the government’s investment summit this week, concerns are looming over potential tax increases which could put downward pressure on economic growth, employment and wage growth”

 
Scott Douglas, Capital Markets Director at at international corporate finance advisor Centrus, commented: 

“The latest UK inflation data offers a much needed respite for consumers and business. The slowdown from previous months data is primarily attributable to a cooling in wage growth, which fell to 4.9% from 5.1%. This marks the first time inflation has dipped below the Bank of England’s 2% target since April 2021.

While this is generally good news for consumers and businesses, all eyes will be on the UK chancellor as she unveils her first budget at the end of the month. Despite some positive coverage around the government’s investment summit this week, concerns are looming over potential tax increases which could put downward pressure on economic growth, employment and wage growth. These measures, combined with lower inflation, could put pressure on the Bank of England to resume interest rate cuts at its next meeting in November.

The geopolitical landscape also remains volatile. Any escalation in the Middle East conflict could increase the price of oil, potentially reversing the downward trend in inflation.

The Bank of England will have to carefully weigh these factors when making its interest rate decision on 7^th November.”