Unexpected Drop: British Inflation Hits Lowest Since 2021

Inflation in Britain fell to 1.7% in September, down from 2.2% in August, surprising economists who expected a smaller drop. This decline fuels speculation about a potential interest rate cut. Key contributors to the fall were lower airfares and petrol, though food prices saw an increase.

Inflation in Britain experienced a larger-than-anticipated decline last month, offering a reprieve watched closely by the Bank of England. This development has sparked discussions surrounding a possible interest rate cut in the coming month.

The Office for National Statistics reported a decrease in the annual consumer price inflation rate to 1.7% in September, down from 2.2% in August. This marks the lowest inflation reading since April 2021. Economists surveyed by Reuters had anticipated a smaller dip, with predictions pointing to a figure of 1.9%.

Sterling experienced a brief decrease against the U.S. dollar upon the release of these figures. Core inflation, excluding volatile sectors like energy, food, alcohol, and tobacco, also fell to 3.2% from 3.6% in August. Chief Economist Grant Fitzner noted the impact of reduced airfares and petrol prices, partially countered by rising food prices. Additionally, factory goods prices saw their most significant drop since October 2020, hinting at diminishing inflationary pressures.

(With inputs from agencies.)