Inflation clings stubbornly to 3.8% for the year to September 2025, confounding forecasts that predicted a rise to 4%. This figure remains nearly double the Bank of England’s 2% target, prolonging the cost of living misery for millions.
The Office for National Statistics (ONS) confirmed the flat consumer price index reading, offering some relief for Chancellor Rachel Reeves ahead of her crucial Autumn Budget on 26 November. Yet experts warn that persistent inflation means the Bank’s Monetary Policy Committee (MPC) may hold off on cutting interest rates, keeping pressure on homeowners and shoppers.
Transport Costs Push Inflation Up, Food Prices Drop
Transport prices, especially petrol and airfares, were the main culprits pushing inflation upward. The rate at which these prices are falling has slowed compared to last year, keeping overall inflation elevated.
“Both the Chancellor and the Bank Governor have blamed Brexit lately—a shared scapegoat as we approach the Autumn Budget and MPC meeting.”
“Now they’ve found a common enemy, let’s see if they can agree on how to kickstart the economy.”
Douglas added that despite cooling from the peak of over 11% in October 2022, inflation remains a “stubbornly difficult” beast that keeps squeezing household budgets and piling pressure on millions.
Chancellor Rachel Reeves Faces Tough Budget Choices
With inflation stuck at 3.8%, Reeves’ upcoming Autumn Budget faces a dilemma. Cutting taxes risks fuelling inflation further, while raising taxes could provoke political backlash amid ongoing cost of living woes.
Homeowners, especially those on variable or tracker mortgages, will likely endure higher interest rates for longer. Fixed-rate borrowers face painful remortgage bills far above pre-inflation levels.
The Bank’s cautious stance prioritises taming inflation over mortgage affordability, meaning tough times ahead for many.
Long Road Ahead to Inflation Target
The UK’s price stability goal remains a long way off. Each extra percentage point above target chips billions from consumer spending power.
Persistent service sector inflation hints the battle could last months, if not years. For now, the modest drop in food prices is little more than a brief breather in an ongoing cost of living crisis.
