Inflation Stubbornly Stuck at 3.8%, Dashing Hopes of Relief
Inflation refuses to budge, holding steady at 3.8% for the year to September 2025—just shy of the feared 4% rise. This rate remains nearly double the Bank of England’s 2% target, dragging millions deeper into cost of living misery.
While this flat reading from the Office for National Statistics (ONS) offers a sliver of hope ahead of Chancellor Rachel Reeves’ crunch Autumn Budget on 26 November, experts warn the grind isn’t over. The Bank of England’s Monetary Policy Committee (MPC) may keep interest rates high, prolonging pain for homeowners and shoppers alike.
Transport Prices Climb, But Food Bills Finally Fall
Fuel and airfares are the villains keeping inflation high. Prices for petrol and flights are still falling, but at a snail’s pace compared to last year, keeping overall inflation inflated.
On the upside, food and drink prices fell for the first time since May 2024. This drop brings a rare easing to battered household budgets after a brutal year of soaring supermarket bills. Recreation and culture costs also dipped, with cheaper live events and entertainment offering some relief.
Gary Fitzner, ONS Chief Economist: “A variety of price movements meant inflation was unchanged overall in September. The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year. These were offset by lower prices for a range of recreational and cultural purchases including live events. The cost of food and non-alcoholic drinks also fell for the first time since May last year.”
Core Inflation Inches Down, But Services Costs Stay Sky-High
Core inflation, which strips out volatile sectors like food and energy, nudged down slightly from 3.6% to 3.5%. It’s a tiny sign that underlying inflation might be easing—but don’t pop the champagne yet.
Meanwhile, services inflation stubbornly remains sky-high at 4.7%, reflecting persisting wage and business pressures. Goods inflation crept up to 2.9%, showing prices on many items are refusing to drop as hoped.
Rate Cuts On Hold as Inflation Refuses to Drop
The steady inflation picture is scaring off Bank of England rate cuts any time soon. Alastair Douglas, CEO of TotallyMoney, slammed the Bank’s cautious approach:
“The Bank has been slow to cut rates, making things more difficult for homeowners.”
“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 warned inflation remains a “stubbornly difficult” beast, still squeezing wallets and piling pressure on millions.
Chancellor Reeves Faces Thorny Budget Dilemma
With inflation stuck at 3.8%, Rachel Reeves’ Autumn Budget faces a tightrope walk. Cut taxes and risk heating up inflation; raise taxes and face political fury amid skyrocketing living costs.
Homeowners on variable or tracker mortgages are braced for more interest rate pain. Fixed-rate borrowers are also set for nasty remortgage shocks far above pre-inflation levels. The Bank’s priority is crushing inflation, even if it means mortgage misery for many.
The Long Fight to Hit Inflation Target Continues
The UK’s inflation target feels a distant dream. Every extra percentage point above 2% steals billions from consumers’ pockets. Persistent high prices in services suggest this battle could drag on for months or even years.
For now, the slight drop in food prices is little more than a brief respite in the relentless cost of living crunch millions face daily.
