Inflation in the UK has fallen below the Bank of England’s desired two per cent target for the first time in three years, according to the latest Office for National Statistics (ONS) figures.
The consumer price index (CPI) rate eased to 1.7 percent for the 12 months to September 2024 in a boon for Britain’s economy following the cost of living crisis.
This drop comes below the forecasts of economists who were pricing in inflation coming in at around 1.9 per cent for September.
For the 12 months to August 2024, the CPI rate was at 2.2 per cent which was slightly above the Bank’s target, unchanged from the month before.
Analysts believe an inflation figure of 1.9 per cent of under will put further pressure on the central bank’s Monetary Policy Committee (MPC) to cut interest rates.
The MPC has opted to hike the base rate over the last couple of years in response to soaring inflation.
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In October 2022, CPI inflation in the UK jumped to 11.1 per cent after energy prices soared due to the Russian invasion of Ukraine.
Responding to today’s figures, Darren Jones, Chief Secretary to the Treasury, said: “It will be welcome news for millions of families that inflation is below two per cent.
“However, there is still more to do to protect working people, which is why we are focused on bringing back growth and restoring economic stability to deliver on the promise of change.”
ONS chief economist Grant Fitzner added: “Inflation eased in September to its lowest annual rate in over three years. Lower airfares and petrol prices were the biggest driver for this month’s fall.”
On November 7, the Bank of England’s rate-setters will meet to discuss potential changes to interest rates.
As it stands, the base rate is sitting at five per cent, recently falling from its 16-year high of 5.25 per cent.
David Murray, financial planning expert at abrdn, cited that experts believe the base rate could plummet to 4.5 per cent in the near future.
However, he warned that borrowers, including those in debt and with mortgages, are still struggling amid the hiked cost of living.
Murray explained: “This doesn’t take away from the fact that households are still experiencing high prices across the board, however and savers should not be complacent.
“Prices are still rising, albeit slower than they could be.
“To ease the pain, you could consider exploring different tax allowances to make your money work as hard as possible, whether that’s considering high-yield savings accounts that offer the best interest rates or keeping your hard-earned cash in ISAs to help boost your net returns.
“If you’re unsure what’s best for you, you might want to speak to a financial adviser who can help you put a plan in place.”
