Hello. It’s Kalpana Fitzpatrick, Katie Williams and Ruth Emery here from MoneyWeek. We’ll be reporting live on tomorrow's inflation data from the Office for National Statistics (ONS).
The background
After peaking at 11.1% in October 2022, inflation has been slowing and briefly returned to the Bank of England’s 2% target in May and June this year. It has inched up slightly since then and is expected to rise further towards the end of 2024, driven by higher energy prices.
The Bank of England will be watching the upcoming inflation report closely as it decides on the timing of future interest rate cuts. The bank’s governor, Andrew Bailey, recently said UK policymakers could be a “bit more aggressive” in their approach if inflation continues to cool.
The CPI report will come out at 7.00 am tomorrow (16 October) and will cover the month of September. We will be reporting live here as soon as it happens, with all the latest analysis.
Scroll for live updates.
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.