The UK inflation rate has now slowed significantly from its peak, dropping below the Bank of England’s 2% target for the first time in over three years in September. The latest Consumer Prices Index (CPI) report showed prices rose by 1.7% on an annual basis in September.
Households will be relieved to see this lower figure after battling far sharper price increases in recent years. Inflation peaked at 11.1% in October 2022 – the highest level in a generation. The battle against inflation isn’t entirely in the rear-view mirror, though. Analysts predict inflation could rise again in the months to come, potentially climbing to around 2.5% by the end of the year. Rising energy prices are the main factor behind these forecasts, after average household energy bills surged 10% from 1 October.
High interest rates have helped bring inflation under control, and the Bank of England is now starting to ease monetary policy constraints as the economy cools. The Bank cut interest rates for the first time on 1 August, bringing some mild relief to mortgage holders and households paying off debts.
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Further interest rate cuts are expected in the months to come, after governor Andrew Bailey hinted the Bank of England could become a “bit more aggressive” in its approach. A cut at the next Monetary Policy Committee (MPC) meeting in November now looks highly likely after inflation’s big drop in September. Some experts believe we could see successive cuts in November and December, potentially bringing the base rate to 4.5% by the end of the year.
If you are following each CPI release, these are the key dates you need to know. For the outlook on interest rates and details of when the Bank of England will next meet, see: “When will UK interest rates fall further?” and “When is the next Bank of England base rate meeting?”
Next UK inflation figures
In the UK, the main measure of inflation is the Consumer Prices Index. The Office for National Statistics (ONS) releases this once a month.
The first nine inflation readings of the year (covering January, February, March, April, May, June, July, August and September) were released on 14 February, 20 March, 17 April, 22 May, 19 June, 17 July, 14 August, 18 September and 16 October. These are the dates for the rest of 2024:
- 20 November (covering October)
- 18 December (covering November)
The final inflation reading for 2024 (covering December) will be released early in the new year on 15 January 2025.
What time is CPI released in the UK?
Each month, the ONS releases the latest CPI data at 07:00. You can access the data by going onto the ONS website and clicking on its release calendar. All published and upcoming releases are listed there. The report you are looking for will be titled, “Consumer price inflation, UK”, followed by the month and year in question.
MoneyWeek regularly reports on the latest inflation data and what it means for you.
What is CPI and how is it calculated?
As mentioned previously, CPI is the main measure of inflation used in the UK. It tells you how much the cost of living is going up or down.
It is calculated using a typical basket of household goods and services – from eggs, flour and milk to hotel costs, vinyl records and air fryers. Yes, that is correct, vinyl records are back in the CPI shopping basket for the first time since 1992 after a recent resurgence in popularity.
The Bank of England keeps a close eye on CPI when setting interest rates. If inflation is too high, the Bank raises interest rates to slow consumer spending and cool the economy. This works in bringing prices down because households have less money to spend when mortgage rates are high and debts are more expensive to repay.
Meanwhile, if inflation is too low, the Bank may lower interest rates so that consumers have more disposable income to spend. Thanks to the laws of supply and demand, this pushes prices back up.
Are household costs still rising?
An inflation rate of 1.7% means household costs are still going up, but at a far slower rate than the double-digit inflation we have seen in the past.
“Low and stable inflation is vital for a healthy economy,” the Bank of England explains. Too much inflation places a burden on household finances and erodes the value of savings, but a small amount of inflation can be a sign of a growing economy.
As mentioned, the headline CPI figure is based on a basket of goods and services, but the rate at which different items go up or down varies from category to category.
The biggest upward shift in last month’s report came from food and non-alcoholic beverages. The cost of milk, cheese, eggs, mineral waters, soft drinks, juices and fruit all went up in September.
Meanwhile, the largest downward contribution to the monthly change in CPI came from transport. Air fares fell by 34.8% in September, as is typical after the busy summer period. Petrol and diesel prices also fell by 5.5p and 6p per litre respectively.
Where is inflation heading next?
According to forecasts, the path ahead is unlikely to be completely straight. The Office for Budget Responsibility (OBR) expects inflation to average out at 2.2% for 2024 as a whole, before dropping to 1.5% for the duration of 2025.
Meanwhile, the Bank of England has said it expects inflation to “edge up to about 2.5% towards the end of the year before falling again”.
The experts at ING think CPI will rise to around 2.5-2.7% later this year. The consultancy Capital Economics is forecasting something similar, and has said it expects CPI to rebound to 2.7% by November. As introduced previously, energy prices will be a big factor in this.
Sarah Coles, head of personal finance at Hargreaves Lansdown, says: “Energy prices will inflate our spending horribly [in the next CPI report], 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.”
Coles adds that petrol prices are likely to add insult to injury next month. “They’ll be back on an upwards trajectory thanks to conflict in the Middle East and rising oil prices,” she says.
There isn’t another CPI reading before the Bank of England’s rate-setting meeting on 7 November, but the October and November inflation reports will come out before the MPC meets in December. The results could have a big impact in deciding where interest rates land at the end of the year.
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