By Joshua Kirby
U.K. prices grew at the same rate in September as the previous month, ending recent months’ decline in inflation as services prices rose.
The consumer price index–which measures a wide basket of goods and services prices–rose 6.7% on year, staying at the same rate as in August, figures from the Office for National Statistics showed Wednesday. This was higher than the 6.6% rise expected by economists, according to a poll compiled by The Wall Street Journal, and complicates the task of the Bank of England as it looks to keep bringing inflation down.
Until September, inflation had eased for the previous three months in a row.
“The annual rate of core inflation has slowed again this month, driven by a slowdown in the cost of many goods, though services prices did rise a little this month,” ONS chief economist Grant Fitzner said.
Core inflation, which strips out the volatile changes in energy and food prices, eased slightly to 6.1% in September, in line with economists’ expectations. The rise in services inflation–to 6.9% in September from 6.8% in August–might worry policymakers at the BOE, since it risks keeping overall price rises elevated. Wage growth–which fuels services inflation–eased in August, according to figures published this week, but remains relatively elevated.
The BOE is struggling to keep bringing inflation closer to a 2% target while avoiding squeezing the economy into a recession. Bank policymakers decided last month to leave the benchmark interest rate at 5.25%, marking the first time in nearly two years they hadn’t decided to lift rates higher.
But the bank shouldn’t worry too much about September’s inflation rate, said Jeremy Batstone-Carr, a strategist at Raymond James Investment Services. Conflict in the Middle East likely boosted inflation in September, as did the back-to-school season, he said in a note.
“This is unlikely to spiral into a full revival and will not unduly perturb the Bank of England ahead of the next rate setting decision,” he said.
“There are signs that inflation will continue to subside in the coming months,” Batstone-Carr said, pointing to easing food inflation that should alleviate pressure on shoppers’ wallets.
Write to Joshua Kirby at [email protected]; @joshualeokirby
(END) Dow Jones Newswires
10-18-23 0246ET
