UK's inflation rate for September 2023 remained at 6.7%, defying expectations of a slight decrease, according to official data released this Wednesday. This rate, more than triple the Bank of England's 2% target, is driven by increasing gasoline prices offsetting the stability in food and beverage prices.
The Bank of England, wrapping up a two-year cycle of interest rate hikes aimed at curbing inflation from a high of over 11%, is not expected to increase rates at its November meeting. Instead, it intends to keep the current borrowing rate at a 15-year peak of 5.25%.
Analysts, including James Smith from the Resolution Foundation, predict a significant drop in inflation next month, potentially below 5%, as energy prices are expected to decrease. This comes as central banks worldwide have increased interest rates from near-zero levels to counter price surges caused by disruptions in the supply chain due to COVID-19 and Russia's invasion of Ukraine.
Despite these measures, there are ongoing concerns about a potential economic contraction in the UK. This poses a challenge for the Conservative Party in the upcoming general elections. The UK's inflation rate remains the highest among G7 nations, surpassing the US's 3.7%. Some economists link this to labor shortages and trade disputes induced by Brexit, which have led to increased business costs.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.