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That includes our inflation coverage for today. Thank you for sticking with us!
For details on when the next inflation figures will be released, see our round-up of upcoming CPI dates.
How to hedge against inflation
Real estate is typically viewed as a means of protecting wealth against inflation, underscored by the fact that today’s data reveals house prices increased ahead of inflation over the past year.
“Property values tend to increase with inflation, with higher rents and replacement costs justifying the increase in values,” Paul O’Neill, chief investment officer at wealth manager Bentley Reid tells MoneyWeek.
However, he adds that a large proportion of wealth is often already tied up in a home, meaning this isn’t as effective a means of protection against inflation for many households.
Keep an eye out for MoneyWeek’s explainer on other ways to protect your wealth from rising inflation later today.
What rate can you earn on your savings?
The top easy-access accounts still pay around 5%, but the number is rapidly dwindling and you may need to jump through some hoops to qualify.
Fixing could be a good option to help you lock in higher rates for longer. The top one-year fixed rate is now 4.58%, according to comparison site Moneyfacts. Even since the start of this week, it has fallen. When we checked on Monday, the top one-year rate was 4.71%.
Time to check on savings?
According to Craig Rickman, personal finance and pensions expert at Interactive Investor, the uptick in inflation data should act as a prompt for savers to check they’re using the best savings accounts to protect their wealth.
“When prices rise at a quicker pace, your savings and investments must work harder to grow in real terms,” he says. “This is an important time to check how much you’re earning on your savings, and shop around for the best deals.
“The highest paying accounts are still outpacing inflation, but the gap is narrowing. And this margin is likely to close further over the coming months with price rises set to continue speeding up.”
The savings market is cooling – could now be the time to fix your rate?
Outlook for house prices
“The ONS's House Price Index lags two months behind, so it is important to acknowledge that today’s data doesn’t reflect some of the short-term uncertainty that the Autumn Budget introduced to the market," says Ben Nichols, managing director at the asset management firm RAW Capital Partners.
He adds: "Prices may have slowed month on month, but the annual price increase, coupled with higher levels of market activity in recent weeks, demonstrates the continued recovery that the market has been experiencing since the Bank of England began its rate-cutting cycle.
"Of course, the Bank has cut rates again since the period this data covers, suggesting this positive trend should continue to the end of the year."
This means first-time buyers might want to get on with things if they are thinking about the best time to buy – particularly with stamp duty thresholds set to fall back in the spring. This will reduce the tax-free threshold for first-time buyers from £425,000 to £300,000.
What’s going on with house prices?
UK house prices increased by 2.9% in the 12 months to September, according to separate official figures also released today. The average UK house now costs £292,000. On a monthly basis, prices were down slightly, falling by 0.3% in September compared to the month before.
On a regional basis, annual house price inflation was highest in the North East, according to the ONS. London was the only region to see house prices fall, down 0.5% in the 12 months to September.
December interest rate prospects dashed?
A December rate cut already looked unlikely, but a higher-than-expected inflation reading today reduces the prospect further. It will come as bad news for those looking to remortgage or buy their first home.
“The average cost of a new fixed-rate mortgage has been creeping up since the Budget, as lenders price their products to reflect expectations that interest rates may stay higher for longer,” says Haine.
“With the latest inflation reading confirming that inflation has not only risen back above the BoE’s 2% target but has come in higher than expected, it means mortgage borrowers could have more pain to contend with if more lenders adjust their rates upwards,” she adds.
Do further inflation risks lie ahead?
Most of the focus in the UK has been on inflationary pressures in the Budget, but savers and investors should cast their gaze wider when assessing inflationary risks on the horizon. Donald Trump’s return to the White House could fan the embers of inflation too.
The tariffs Trump has threatened to impose could prove disruptive to global trade, pushing up costs for businesses. Higher costs are generally passed on to consumers as businesses put their prices up in an attempt to protect their margins.
Some point out that Trump’s bark is often worse than his bite. However, analysis from the National Institute of Economic and Social Research (NIESR) suggests UK inflation could be 3-4 points higher over the next two years, if Trump imposes the tariffs that have been threatened.
Is another inflationary storm brewing in the form of Trump's return to the White House?
Higher inflation is “a blow to savers and investors”
Ed Monk, associate director at Fidelity International, points out that higher inflation will erode the real return savers and investors can earn.
He says: “Savers have enjoyed an extended period where interest has exceeded price rises, and fund purchases by our clients demonstrate this appetite for cash and cash-like assets, with cash and short-maturity bond funds featuring highly in the list of best-sellers this year.
“Inflation-beating interest on cash will no doubt have [...] tempted some investors to move money from investments into savings accounts. That appeal is eroded by higher inflation, even if cash interest is likely to exceed inflation for a while longer.”
Core and services inflation both up
Both core and services inflation also picked up marginally this month. Core inflation, which strips out volatile categories like energy, food, alcohol and tobacco, rose from 3.2% to 3.3%. Meanwhile, services inflation rose from 4.9% to 5.0%.
Services inflation is an important measure for the Bank of England as the sector accounts for around 80% of the UK economy. The MPC might not be too worried about the slight increase this time, though.
As the economists at financial institution ING have previously pointed out, within services inflation, there are some categories that the MPC cares less about.
For instance, in October, the rise in the rate of annual transport inflation (-2.2% to -1.9%) was supported by air fares. The MPC will be less worried about the price of flights than other items within the CPI basket.
What does it mean for your personal finances?
“While inflation at 2.3% is still a vast improvement on the peak of 11.1% at the height of the cost-of-living crisis two years ago, households are likely to be concerned that the current period of improving financial flexibility may prove to be short-lived,” says Alice Haine, personal finance analyst at Bestinvest, the online investment platform.
“CPI food inflation edged up to 1.9% in October from 1.8% in September and while this is better than the almost 20% it hit in the Spring of 2023, Budget blues will dent the outlook from here,” she adds.
It comes after 79 retailers including Tesco, Sainsbury’s and Marks & Spencer wrote to Reeves to warn of possible price rises and job cuts in the wake of the employer National Insurance hike.
Tesco and other supermarkets were among the 79 retailers who wrote to Reeves.
Inflation higher than expected
Today’s inflation reading was slightly higher than expected. Factset consensus estimates published by Morningstar suggested the figure would come in at 2.2% rather than 2.3%.
Energy prices were the main factor driving October's increase
The largest upward contribution to the monthly change in the CPI annual rate came from housing and household services, the Office for National Statistics (ONS) reports, mainly because of electricity and gas prices.
The largest offsetting downward contribution came from recreation and culture – specifically cultural services, data processing equipment and package holidays. These were partially offset by games, toys and hobbies.
BREAKING: UK inflation rate rises to 2.3% in October.
This is up from 1.7% in September's report. It brings the UK's official rate back up above the Bank of England's 2% target.
Good Wednesday morning. There is around 15 minutes to go until the inflation figures are released. It’s likely the government will be watching the news closely and hoping for a lower-than-expected reading.
It is too early for Budget policies to have impacted the latest report – several of the policies announced won’t kick in until April. However, any large increase in the headline rate could add to the fallout already being faced.
Already this week, farmers have been protesting against the restrictions Reeves imposed on agricultural property relief.
On top of this, 79 UK retailers have written to Reeves to warn of possible price rises and job cuts in the wake of the employer National Insurance hike. Those involved include Tesco, Sainsbury’s and Marks & Spencer.
There has already been significant fallout in the wake of the Budget, including from farmers. It comes after the government slashed agricultural property relief for inheritance tax.
Thank you for joining us on MoneyWeek's live blog this evening. We will be back tomorrow morning, sharing our analysis as soon as the inflation report is published at 7.00am.
What’s going on with energy prices?
Although inflation is likely to rise tomorrow, the good news is that energy prices (the main driver) are still significantly lower than they were at the peak of the cost-of-living crisis.
Under today’s Ofgem price cap, the average home pays an annual figure of £1,717. Meanwhile, between October 2022 and June 2023, the government capped the average annual bill at £2,380.
According to the latest forecasts from consultancy Cornwall Insights, energy prices are expected to rise by another 1% in January before dropping slightly in April and October. We share further details in: “Will energy prices fall in 2025?”
Will interest rates be cut in December?
Whatever tomorrow’s inflation report has in store, another interest rate cut before the end of the year looks unlikely. Markets have turned bearish on the prospect of a December cut in the wake of the Autumn Budget, but even before then, experts were on the fence.
Almost two-thirds of those polled by Reuters between 22 and 28 October said they thought rates would be kept on hold at the final meeting of the year.
For the Bank of England, it’s all about services inflation
Although the headline rate is expected to rise above 2% again tomorrow, the experts at financial institution ING say it is services inflation that matters most to the Bank of England. The services sector accounts for around 80% of the UK economy.
James Smith, developed markets economist at ING, adds: “We see scope for [services inflation] to move fractionally higher to 5.0%, though when we strip out categories the Bank has told us it cares less about (like rents, hotels), then our own measure of so-called 'core services' inflation is set to move dramatically lower from 4.8% to 4.3%.”
Smith says it probably won’t be enough to prompt the Bank of England to cut interest rates in December. However, it is “exactly this sort of trend” which makes him think the Bank will cut rates more aggressively than market pricing currently suggests.
Where is inflation heading longer term?
The Bank of England has said it expects inflation to “edge up to about 2.75% towards the end of the year before falling again”.
Meanwhile, the Office for Budget Responsibility (OBR) expects inflation to average out at 2.5% in 2024 and 2.6% in 2025. It then expects it to fall to 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2% in 2029.
Inflation forecasts
- According to FactSet consensus estimates published by Morningstar, the headline CPI rate is expected to come in at 2.2% tomorrow.
- Meanwhile, the National Institute of Economic and Social Research (NIESR) thinks CPI will come in at 2.3-2.4%. It says higher energy prices will be responsible for most of this increase, adding 0.5 percentage points.
- Deutsche Bank thinks inflation will hit 2.07%, which would be rounded to 2.1%.
What time will inflation be announced tomorrow?
CPI reports are published at 7am. This means early risers will see the latest inflation figures before they see the sun, which won’t rise until 7.27am in Greater London tomorrow.
We will be reporting live as it happens, sharing our analysis on what it means for interest rates, investments and your personal finances.
Welcome back
Good Tuesday afternoon. We are back on MoneyWeek’s live inflation blog as we gear up for tomorrow’s report.
Temperatures in the UK might be cooling, but inflation is expected to heat up. The bad news for those of us reaching for the thermostat is that higher energy prices are expected to drive the increase.
It comes after the Ofgem price cap surged on 1 October, pushing the average household bill up by 10%.
Thank you for joining us
This post brings this inflation blog to a close. Thank you to all the early risers who followed along with us as we reported the latest CPI news.
Could a weaker pound impact UK investors?
We have already established that the pound may weaken if the Bank of England takes a more aggressive approach to interest rate cuts. But what would this mean for investors? In short, there could be both positive and negative side effects.
Nigel Green, chief executive of the deVere Group, says domestic investors may face some currency headwinds, particularly if they hold foreign assets or UK assets with international exposure. “The weaker pound increases the cost of acquiring global assets and may reduce returns when converting profits back to sterling,” he explains.
On the other hand, international investors “may find opportunities in undervalued UK equities and real estate as the currency weakens,” he adds. British exporters also “stand to gain a competitive edge as their products become more affordable for international buyers,” in Green’s view.
International investors wouldn’t necessarily be the only beneficiaries of a weaker pound, though. Those who hold UK equities could also benefit if international demand for UK stocks and UK products picks up. “Investors should look to sectors like pharmaceuticals, tech, and aerospace, which are well-positioned to benefit from global demand,” Green says.
Market response to inflation news
The FTSE 100 opened 0.7% higher this morning on the latest inflation news. It comes as interest rate expectations are ramping up.
Interest rate cuts are typically good news for equity markets, as they tend to reduce the pressure on the economy. This can give earnings a boost, resulting in stronger company performance.
How has the pound responded to the drop in CPI?
The pound has dropped against the dollar and the euro in response to this morning’s inflation reading, as investors anticipate a more aggressive approach to interest rate cuts.
Lower interest rates are less attractive to foreign investors and tend to decrease the value of the domestic currency.
“Money markets are now expecting quarter-point cuts at the next three MPC meetings,” says Rob Clarry, investment strategist at wealth management firm Evelyn Partners.
Tax tip if you are reviewing your savings
If you are reviewing your savings in light of the latest inflation data (and a potential interest rate cut in November), remember to think about the tax implications of any account that you open.
Once you earn a certain amount of savings interest (£1,000 for basic-rate taxpayers), you have to start paying income tax on it. But by stashing your savings in a cash ISA, you can protect these earnings from the taxman. Adults can put up to £20,000 in an ISA each tax year.
Time to fix your savings?
Another base rate cut in November now looks likely, which means savers only have a short window of opportunity to lock in higher interest rates on their savings. Rates are already coming down, so it could be wise to act sooner rather than later.
We have seen how quickly savings rates can plummet after a base rate cut – scores of providers slashed their rates after the Bank of England’s 1 August decision. Rates are likely to drop further over the months to come, not just in response to a potential cut in November, but in anticipation of it.
A one or two-year fixed-rate savings account will allow you to lock in a guaranteed rate. However, remember, you won’t be able to access the cash until the fixed period expires. Only lock away any cash you won’t need to use in the short term. An easy-access account is better for your emergency fund.
See our round-up of the best easy-access rates, one-year savings accounts, regular saver accounts and cash ISAs for the latest deals on cash savings.
What does the latest inflation data mean for mortgages?
The latest drop in CPI could spell good news for mortgage customers, if it results in another interest rate cut in November.
Mortgage rates have fallen significantly from their peak last summer, but remain higher (and more volatile) today than they have been for much of the past decade. What’s more, after falling sharply after the August base rate cut, they have been inching up again in recent days.
Recent rises are partly a response to pre-Budget jitters. Many are expecting tax rises and some are nervous about the potential impact if Rachel Reeves decides to change the government’s rules on borrowing. Speculation about this has been ramping up in recent weeks.
“Fixed-rate pricing depends on what the market anticipates may happen to interest rates and uncertainty over the forthcoming Budget, mixed messages from the Bank of England and global unrest is pushing costs back up for lenders,” says David Hollingworth, associate director at L&C Mortgages.
If interest rates are cut again in November, which now looks likely, mortgage rates could be back on a downward trend.
Could we see back-to-back rate cuts?
A November rate cut now looks likely, after inflation slowed to 1.7% in September. But what about a December rate cut? There are two more MPC meetings before the year is out.
“A December cut is by no means a slam dunk just yet, although if the positive signs in the leading indicators do eventually filter through to a softening in the hard data, it could be when the BoE switches to a back-to-back cutting pace,” says Kyle Chapman, FX markets analyst at Ballinger Group.
Remember that CPI is expected to rise again in October’s report, which will come out before the December MPC meeting and could influence views. The MPC is expecting this increase, but it will be watching closely to see whether the headline rate rises by more or less than it has forecast.
“Ahead of the inflation numbers this morning the bond market was pricing in three to four quarter-point cuts before the end of next year, but that timetable may accelerate if inflation continues to undershoot the Bank of England’s forecast,” says Ed Monk, associate director at Fidelity International.
State pension set to rise by 4.1% next April
There is good news for pensioners, with the state pension now in line for an increase of 4.1% next April, more than double the inflation rate thanks to the triple lock.
If confirmed in the Budget, those on the full basic state pension will see payments increase from £169.50 to £176.45 and those on the full new state pension will see payments increase from £221.20 to £230.30 per week.
Steven Cameron, pensions director at Aegon says: “After many losing out on the winter fuel allowance, state pensioners can take some comfort in knowing that a 4.1% increase in their State Pension is expected next April. This is more than double the inflation figure of 1.7% announced today.
“This rise is due to the Triple Lock formula, under which pensions increase each April by the highest of three measures – earnings growth (the year-on-year rise in average earnings for the period May to July), price inflation for the year to September (which was announced this morning as 1.7%) or 2.5%. As the average earnings growth – which was recalculated as 4.1% rather than 4% – is the highest of the three, then subject to official confirmation, this should see the State Pension increase by 4.1% for 2025/26.”
“The squeeze has eased”, expert says, but could inflation rise again next month?
“The squeeze has eased, and we have room to breathe. But brace yourself, because you’re going to need to tighten your belt again next month. The yo-yo of inflation will bring a smile to people’s faces this month, but it’ll be more of a grimace in four weeks’ time. It’s a challenge for our budgets – but will make surprisingly little difference to the Bank of England – so savings and mortgage rates should keep getting slimmer as we move towards the end of the year,” says Sarah Coles, head of personal finance at Hargreaves Lansdown.
"Energy prices will inflate our spending horribly, because the energy price cap soared 10% at the start of October. When measured against a fall a year earlier, it’s going to look particularly grim. Petrol prices are likely to add insult to injury. They’ll be back on an upwards trajectory thanks to conflict in the Middle East and rising oil prices," she adds.
Autumn Budget is the “final hurdle” to November rate cut
“These figures provide reassurance that the UK has moved into a more moderate inflation environment, aided by lower fuel prices,” says Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.
He adds: “The notable drop in services inflation suggests that underlying price pressures are becoming less sticky. The squeeze from slower economic activity and weaker wage growth should help keep it on a downward trajectory.
“Though the stars are aligning for a November rate cut, the upcoming Budget is the final hurdle as rate setters will want to assess the inflationary impact of any measures announced before loosening policy again.”
What does the slowdown in inflation mean for consumers?
The slowdown in inflation is certainly welcome news for consumers, as it means prices are not rising as fast as they were back in October 2022 when inflation was at 11.1%.
While the slowdown will ease some of the challenges, food inflation still comes in at 1.9% in September from 1.3% in August.
The latest report will add pressure on the BoE to cut rates at its next MPC meeting in November, which could alleviate borrowing costs.
Larger-than-expected drop in services inflation could boost chances of a rate cut
Services inflation also slowed in September, with the rate of price increases falling from 5.6% to 4.9%. As we have explored previously, this is an important one for the Bank of England as the services sector accounts for around 80% of UK economic output.
September’s drop is a significant move in the right direction after services inflation rose by 0.4% in August.
What’s more, the rate of services inflation in September fell by more than many experts were forecasting. Economists we spoke to yesterday thought it could come in at around 5.2%. Does this spell good news for those hoping for an interest rate cut on 7 November?
Transport costs are falling but the price of your weekly food shop may still be going up
Transport was responsible for the largest downward contribution to the change in CPI, with larger negative contributions from air fares and motor fuels, the ONS says. Meanwhile, the largest offsetting upward contribution came from food and non-alcoholic beverages.
Prices in the transport sector fell by 2.2% in the 12 months to September, down from annual price rises of 1.3% in August.
BREAKING: Inflation slows to 1.7%
The Consumer Prices Index fell to 1.7% in the 12 months to September, the ONS has just revealed, down from 2.2% in August.
Inflation to drop below 2% target for first time in over three years?
Good Wednesday morning. It’s inflation day, and there’s less than half an hour to go.
Experts are saying today’s report could be the first time inflation drops below that crucial 2% mark in over three years. The last time CPI came in below the Bank of England’s target was April 2021.
The government will be hoping for a fall in CPI ahead of the Autumn Budget
There are just over two weeks to go until Labour delivers its first Budget on 30 October. According to Nicholas Hyett, investment manager at Wealth Club, the government will be “hoping for a fairy tale at the Budget, and tomorrow’s inflation result could provide the perfect backdrop”.
He says that coming after some healthy employment data today, if inflation falls from 2.2% to 1.9% as widely predicted, it suggests “an economy that’s in rude health and capable of bearing the painful higher taxes that the government thinks are needed to fund public services”.
Hyett adds: “The danger though is that the UK economy turns into a pumpkin at the worst possible moment. An unexpected inflationary spike would probably lead to interest rates remaining higher for longer, reducing the chancellor’s economic wiggle room and potentially making those tax hikes more painful. The manner of the chancellor’s arrival at Budget day will be determined when the clock strikes 7 tomorrow morning – will it be a coach and four, or does she creep in with a pumpkin under one arm and four mice trailing behind?”
Read the latest predictions for Budget day.
What do the latest wage growth figures mean for inflation?
The latest ONS labour market report was published today, and showed wages are now growing at the slowest rate in over two years.
This is good news for inflation, as there have been lingering fears that higher wages could be passed on in the form of higher prices for goods and services.
Read the latest MoneyWeek analysis: “Wage growth slows again – will interest rates fall in November?”
Will the stickiness in services inflation subside?
Much of the commentary in recent months has focused on the stickiness of services inflation – and with good cause. The services sector accounts for around 80% of UK economic output.
“Services inflation is […] the most important number for the Bank of England right now, and it’s been stickier than in the eurozone or US,” says James Smith, developed market economist at ING. “We’re expecting it to dip from 5.6% to 5.2%, which would be below the BoE’s 5.5% forecast.”
He adds: “If these figures continue to undershoot the Bank’s projections over the next few months then we think the pace of rate cuts will accelerate. A November cut looks fairly baked in, but unlike markets we think that will be followed up with another move in December.”
What inflation rate are experts forecasting?
As we gear up for tomorrow’s report, what are analysts forecasting?
Morningstar recently said the headline CPI rate is expected to nudge down to 2.1%, based on consensus estimates from FactSet. This would constitute a 0.1% drop from August’s reading of 2.2%.
The experts at ING are forecasting a bigger drop to 1.9%, driven by an expected fall of almost 4% in petrol prices. They think CPI will pick up again later this year, though, rising to around 2.5-2.7%.
The consultancy Capital Economics is also predicting a fall from 2.2% in August to 1.9% in September, followed by a rebound to 2.7% by November.
Meanwhile, Deutsche Bank says CPI could drop to “a new cyclical low” of 1.8% in September.
November interest rate decision will hinge on September CPI
Good Tuesday afternoon. There are less than 24 hours to go until September’s CPI report is released – and it’s going to be an important one in determining whether interest rates are cut at the upcoming monetary policy meeting in November.
Governor Andrew Bailey recently told The Guardian UK policymakers could become “more activist” with rate cuts if inflation continues to cool. But what will tomorrow’s report reveal?
The Monetary Policy Committee (MPC) won’t just be looking at the headline figure when deciding whether or not to trim rates. Core and services inflation will also be important indicators as policymakers assess whether domestic inflationary pressures are waning.