Flat CPI figures prompt speculation over Bank of England's next move
UK inflation remained unchanged in September, with the consumer price index (CPI) rising 3.8% year-on-year, according to the Office for National Statistics (ONS).
This figure matched August’s rate and was below market expectations of 4%. On a monthly basis, prices were unchanged, following a 0.3% increase in August.
The broader CPIH measure, which includes owner-occupiers’ housing costs, also remained steady at 4.1% annually. Food and non-alcoholic beverage inflation eased to 4.5%, down from 5.1% in August, marking the first decline in these prices since May of the previous year. Housing and household services inflation edged down to 5.9%. Core inflation, which excludes energy, food, alcohol, and tobacco, fell slightly to 3.5% from 3.6%.
The latest CPI figures showed that petrol prices and airfares contributed upward pressure, but this was offset by lower prices for recreational and cultural goods, including live events. The cost of food and non-alcoholic drinks also fell, while factory gate prices for goods continued to rise, driven by higher food costs.
The Consumer Prices Index (CPI) rose by 3.8% in the 12 months to September 2025, unchanged from August 2025.
— Office for National Statistics (ONS) (@ONS) October 22, 2025
The September, August and July 2025 figures were the joint-highest recorded since January 2024, when the rate was 4.0%.
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“A variety of price movements meant inflation was unchanged overall in September,” said Grant Fitzner, chief economist at the Office for National Statistics. “The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year.
“These were offset by lower prices for a range of recreational and cultural purchases including live events. The cost of food and non-alcoholic drinks also fell for the first time since May last year. Meanwhile, the annual rise in the cost of goods leaving factories continued to increase, driven by higher food prices.”
Despite the lower-than-expected figures, the UK’s inflation rate remains the highest among G7 nations. The data has prompted speculation about the Bank of England’s next move, with some market participants anticipating a possible interest rate cut. However, the bank’s policymakers have recently signalled caution, noting that inflation remains nearly double the 2% target.
“With the Bank of England taking a ‘gradual and careful’ approach to easing monetary policy, it’s likely to be next year now before we see a cut in the base rate,” said Richard Pike, chief sales and marketing officer at financial services software provider Phoebus. “We’ve seen mortgage rates ticking up in recent weeks, but the good news for homebuyers is that they remain substantially lower than a year ago.
“However, with growth and productivity weak, and UK businesses and households highly cautious, Rachel Reeves needs to pull a rabbit out of the hat in the upcoming budget to balance the books without fuelling further inflationary pressures with potential tax rises.”
“Rachel Reeves has warned that her Autumn Budget has required some ‘tough decisions’, but it’s crucial now that offsetting measures are introduced to avoid further inflationary damage from whatever tax amendments the budget is due to trigger,” added Matt Harrison, customer success director at Finova Broker.
“While many looking to buy or sell wait with bated breath for the budget’s outcome, its important the property market keeps transactions moving as fast as possible.
“In the current climate, brokers must look beyond the best interest rates to lenders that can deliver in terms of speed and service. Until the budget dust settles and we get some good news from the Bank of England, locking transactions in with those who are willing to take the risk will be key.”
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