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UK inflation unexpectedly holds steady
and bolsters hopes of November rate cut
[October 22, 2025]
LONDON (AP) — Inflation in the U.K. unexpectedly held steady in
the year to September as higher prices at the pump were offset by lower
food costs, official figures showed Wednesday in a development that has
bolstered hopes of another interest rate reduction next month.
The Office for National Statistics said consumer prices rose by 3.8% on
an annual basis, unchanged from the levels seen in the previous two
months.
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Britain's Chancellor of the Exchequer Rachel Reeves walks to the G20
meeting during the World Bank/IMF Annual Meetings at the International
Monetary Fund (IMF) headquarters in Washington, Thursday, Oct. 16, 2025.
(AP Photo/Jose Luis Magana) |
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Most economists had expected the rate to rise to 4%, which would
have been double the Bank of England's target.
Economists said the flat reading will bolster hopes at the
central bank that inflation has peaked and will back down
towards its target over the coming months.
“Price pressures should begin to slowly ease in the coming
months, but we are unlikely to see a more substantial downshift
in inflation until the first half of next year," said Martin
Sartorius, principal economist at the Confederation of British
Industry.
He added that the “downside surprise” in inflation raises the
possibility that the central bank may cut interest rates again
at its next policy meeting on Nov. 6. Last month, it held its
main interest rate at 4% as U.K. inflation concerns weighed on
policymakers.
The inflation figure will also be welcomed by Treasury chief
Rachel Reeves as she prepares to deliver a crucial budget
statement on Nov. 26, which is expected to see taxes rise again.
September’s inflation rate is used to link welfare benefits for
the upcoming year, so the cost of funding that will be lower
than anticipated.
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