• The Bank of England’s Monetary Policy Committee (MPC) voted to keep interest rates at 3.75% today.
• The decision was in line with expectations from most experts.
• The MPC seems to be adopting a ‘wait and see’ approach to setting rates, holding off on a hike or cut until we see concrete evidence of how the war is affecting the UK.
• The Bank estimates that inflation will be lower than their previous expectations in 2026.
• The latest inflation data showed prices rose by 2.8% in the year to May 2026, unchanged from April.
• Unemployment fell slightly to 4.9% in the three months to April.

When will interest rates fall further? | Is the UK heading for stagflation? | MPC meeting dates | UK inflation forecast |

Good afternoon and welcome to MoneyWeek’s live coverage of tomorrow’s (18 June) interest rates decision.

The Bank of England’s Monetary Policy Committee (MPC) will meet today to decide where to take interest rates, and the decision will be announced on Thursday.

Follow along for the latest commentary and analysis on the upcoming decision and the breaking news tomorrow afternoon.

What is the Monetary Policy Committee (MPC)?

The Monetary Policy Committee (MPC) is a group of nine experts who are responsible for setting interest rates.

The group is made up of five senior members of staff at the Bank of England, and four external experts who are there to make sure the MPC benefits from expertise outside the BoE. The committee is chaired by Andrew Bailey, the governor of the Bank.

They meet every six weeks and vote on whether to cut, hold, or raise interest rates. If there is a tie, then the Bank of England governor Andrew Bailey holds the deciding vote.

Interest rate decisions are usually announced on a Thursday, though the meeting itself typically takes place on the day before the announcement.

At their last meeting, the MPC voted to hold rates at 3.75%, with the motion passing by eight votes to one.

ONS: Inflation held steady at 2.8% in May

Inflation held at 2.8% in the 12 months to May, as the lowest food inflation in 17 months helped offset high transport prices, the latest figures from the Office for National Statistics (ONS) show.

The figure undershot expectations from many economists who expected inflation to rise.

Although inflation is lower than many had forecasted, it is still significantly above the Bank of England’s 2% target and many economists expect it to rise this year thanks to the economic disruption from the Iran war.

The largest upwards contributor to inflation in May was the transport sector, where inflation was 6.8% in the year to May. Price growth for airfares, vehicle taxes, and motor fuel costs pushed May’s overall inflation up by 0.29 percentage points.

Much of this was offset by surprisingly low food inflation, which was the lowest in May since December 2024. Food prices rose by 2.2% in the 12 months to May, pulling overall inflation down by 0.07 percentage points.

Other notable downwards contributions to the inflation rate came from the housing and household services, furniture, clothing, restaurant, and recreation sectors.

For more detail and analysis on today’s inflation figures, you can read our inflation live report from earlier today.

What’s the link between interest rates and inflation?

Inflation is one of the most important, though not the only, economic indicators used by the MPC to help them set interest rates.

This is because the Bank of England has a mandate to keep inflation at 2%, a level of price growth that economic consensus deems healthy for an economy.

Most Western central banks, like the European Central Bank (ECB) and the US’s Federal Reserve (Fed), have an inflation target of 2%.

The Bank of England can use monetary policy to help keep inflation at the target level. The most important of these levers is the moving of interest rates.

Broadly speaking, when inflation is too high, the MPC will raise interest rates, and when it is too low, it will lower them.

These are not the only two reasons why interest rates are moved. For example, rates might be lowered if economic growth is too slow in a bid to speed up the economy.

Where have interest rates gone in the last decade?

Interest rates are currently at 3.75%, the lowest they have been since February 2023.

Before 2022, rates had languished under 1% for the most part as low interest rates were used as a tool to help stimulate the economy following the 2008 financial crisis and during the covid-19 pandemic.

But high rates have been the norm since 2022, when energy prices exploded in the wake of the Russian invasion of Ukraine. This led to high inflation and the start of the cost of living crisis, which we are still feeling the effects of today.

In order to tame inflation, the Bank of England quickly and aggressively hiked rates, going from 0.5% in February 2022 to 5.25% in August 2023.

Rates have since been gradually lowered, with the bank rate going from 5.25% in July 2024 to 3.75% in December 2025, where they have stayed.

Before the Iran war, most economists expected the Bank to cut rates at least twice in 2026, but few now expect this to happen.

They now either expect rates to stay at 3.75% for the rest of the year, or potentially rise depending on how deep the inflationary shock from the war will be.

What should we expect from tomorrow’s interest rates announcement?

Most economists agree that an interest rate cut is incredibly unlikely tomorrow as global economic conditions make this a risky move. If rates are cut at a time when many expect inflation to rise, it could exacerbate the issue.

Instead, many experts are forecasting that the MPC will choose to hold interest rates at 3.75% for the fourth consecutive meeting.

Today’s inflation data bolsters the case for a hold, as it undershot the Bank’s projection by 0.4 percentage points, helping paint a rosier picture of price growth.

With inflation holding steady compared to the April 2026 figure, the possibility of a rate hike in tomorrow’s announcement also becomes more unlikely, though future hikes are not off the table yet.

Experts at Oxford Economics forecast a hold at tomorrow’s meeting, expecting the MPC to vote 7-2 in favour of a hold.

Edward Allenby, senior economist at Oxford Economics, said: “Although energy prices remain elevated, most MPC members don’t appear close to voting for tighter policy.

“Early warning signs of indirect and second-round effects remain benign, and most members have argued that the weakness in the economy means the risks around the medium-term inflation outlook are two-sided. But these members are still likely to signal that they remain open to rate rises if necessary.”

The economic backdrop to tomorrow's announcement

The economic backdrop to tomorrow’s MPC meeting is a mixed picture. While May’s inflation figures were much lower than most economists expected, the rest of the economic news is not quite so rosy.

The UK economy shrunk in April as the country started to feel the economic disruption from the Iran war, figures from the ONS showed last week.

The economy contracted by 0.1% in the month to April, the first time negative growth figures were seen since August 2025.

The contraction is a far cry from the more positive growth figures in the first quarter of 2026, which showed the economy grew by 0.6%, indicating that the Iran war disrupted the start of an economic recovery for the UK.

Negative growth is a big worry for policymakers as it means the country is getting poorer as a whole.

When periods of economic contraction are prolonged, the effect is worse as firms see revenues dwindle and start to lay off staff – if the economy shrinks for two consecutive quarters, it officially enters a recession.

We are not quite at that point yet, but depending on how the economy responds to the economic shocks coming, we could get closer.

The Bank of England also closely monitors the labour market to help inform their interest rates decision.

The latest figures show unemployment climbed to 5% in the three months to March, bringing joblessness to its highest level in almost six years.

Meanwhile, wage growth is slowing. In the three months to March, wages grew by just 3.4%, also the slowest rate in six years.

Although high unemployment and slow wage growth are bad for individuals, according to the orthodox view of economics, a soft labour market does act as a disinflationary pressure in the economy – if you are laid off, your income falls and so does your spending.

That means that a poor jobs market can help lower inflation, which can in turn help persuade the MPC to cut rates.

Why does conflict in the Middle East mean inflation in the UK?

The war in Iran has caused a significant global economic shock with trade being disrupted since 28 February as hostilities have made transporting goods through the region very risky.

The disruption has been particularly acute because the Strait of Hormuz, a narrow waterway between Iran and Oman through which around 20% of the world’s oil and gas is transported, has remained shut.

With such a large proportion of the world’s oil supply effectively stuck in the strait, oil prices have soared.

The average price of a barrel of Brent crude oil was around $70 before the start of the war, but once hostilities began prices became high and volatile. They peaked at around $114 a barrel in May, but hovered between $90 and $100 for the most part since February.

Following news that a peace deal had been reached between the US and Iran, prices plummeted as traders expect the Strait of Hormuz will reopen and allow the ships stuck there to continue on to their original destination.

But even if this peace deal is signed and comes into full effect, the economic consequences of the war will be felt for some time.

Though the oil supply is set to return to normal, the damage has already been done.

The price of oil impacts how much many everyday items cost. This includes more obvious things like petrol and diesel, but also goods you may not expect like crayons, plastic bags, and iPhones.

With prices being so high for four months, we can expect the hangover effects to last for the rest of the year and potentially spill into 2027. The hard work of restarting the whole process of oil production and distribution takes time.

An additional pain point for the UK from the war is energy prices. The closing of the Strait of Hormuz sent wholesale energy prices flying, and this will be reflected when the next price cap comes in on 1 July.

Millions of households in the UK will be shelling out around 13% more for their energy this summer, and prices are expected to remain broadly at this elevated level until at least 2027, according to most forecasts.

When will the interest rate decision be announced?

The Monetary Policy Committee’s (MPC) interest rates decision will be announced tomorrow (17 June) at 12pm.

Alongside the decision, the Bank will publish the minutes from the MPC meeting, where the committee’s thinking can be seen.

This document also has statements from each MPC member on why they voted the way they did.

Every other meeting, the Bank of England also publishes a Monetary Policy Report that sets out the economic analysis and inflation projections used by the MPC.

There will be no report published alongside the June meeting as one was published in April.

Thank you for following our live coverage of interest rates this afternoon. We will pause the blog for now, but will be back in the morning.

Make sure to come back to this page tomorrow to get the latest breaking news, analysis, and commentary on interest rates when the MPC announces their decision.

Good morning. Welcome back to our live coverage of today’s interest rates decision.

The Bank of England will announce whether rates are falling, rising, or staying where they are at 12pm.

While most economists think the bank rate will remain at 3.75%, there is still a small chance that rates will rise today.

Follow this page to get the news as soon as it's announced, as well as analysis and commentary.

ONS: Unemployment fell slightly to 4.9% in three months to April

Unemployment fell to 4.9% in the three months to April, down from a reading of 5% in the previous month, according to the latest figures from the Office for National Statistics (ONS).

Meanwhile, payrolls rose to 30.3 million in May, up slightly by around 2,000 compared to April.

The figures slightly undershot most expectations from economists, who largely anticipated joblessness to remain at 5%.

Liz McKeown, director of economic statistics at the ONS, said: “The labour market remained broadly stable in the latest quarter, with further softening evident in some numbers.”

The data indicates the jobs market may be strengthening. If this is the case, it would be good news for workers, but potentially mean the Bank of England will be more inclined to keep interest rates high to avoid the inflationary pressures that arise when the jobs market is strong.

The ONS also published provisional data for May, showing the number of vacancies in the UK was down by around 2.6% (19,000 jobs) in the period between March and May, the lowest level since April 2021.

McKeown said the fall in vacancies suggests “firms are becoming more cautious about taking on new staff”.

The provisional figures also showed payrolls rose to 30.3 million in May, up slightly by around 2,000 compared to April.

ONS: Wage growth remains at a near six year low

Public sector wages are growing far faster than those in the private sector, new data from the ONS shows, as overall earnings growth remains at its slowest level in almost six years.

Wages for the average worker in the UK grew by 3.4% in the year to April when excluding bonuses, remaining at the same level as the previous month. When including bonuses, this figure grows to 4.4%.

Liz McKeown, director of economic statistics at the ONS, said: “Regular wage growth in the private sector slowed to its lowest rate in five and a half years, though total earnings are growing faster because bonus payments in March and April are higher than a year ago, particularly in the financial sector.

“Public sector pay growth increased but is once again affected by the timing of pay awards varying this year.”

Public sector workers received the biggest pay bump in the period, with their average wages growing by a rapid 5.1%.

Private sector wages lagged far behind this figure, growing by just 2.9% overall in the same period. When excluding bonuses, earnings grew at their slowest rate since October 2020, during the height of the covid-19 pandemic.

Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, said the latest labour market figures “point to a jobs market struggling under the strain of soaring energy bills and employment costs, with more firms limiting hiring and holding down pay, especially for younger workers”.

He said: “Weak wage growth offers a silver lining for rate-setters by raising hopes that any inflationary spillover from the Iran war will be limited, especially as rising unemployment will help keep pay settlements heading downwards.”

He added that the figures “seal the deal” on an interest rate hold today as rate-setters will be reassured that a soft labour market can help mitigate the inflationary shock from the Iran war.

Recap: What you should expect at 12pm

The MPC’s interest rates decision will be announced at 12pm today. We will be covering the result of the decision in this live report.

Most economists think the MPC will keep rates where they are at 3.75% for the fourth consecutive meeting.

They are likely to do this because of the economic shock that is coming from the Iran war. Analysts expect the war to push up inflation in the UK this year, although we are yet to see data that shows how deep the shock is.

While fuel prices are already high because of the war, and energy prices are set to rise from July onwards, overall inflation has been lower than expected in March and April, holding steady at 2.8%.

However, when the new energy price cap comes in in July, we can expect inflation to rise more significantly.

As the Bank of England has a mandate to keep inflation at 2%, they are highly unlikely to cut interest rates at a time like this, as doing so might exacerbate the problem.

While a hold is the most likely result, the MPC may decide to raise interest rates to help stave off inflation. However, a rate hike is not expected today as the MPC will likely wait and see before taking more drastic action.

Before the war, most experts thought the MPC would cut interest rates twice more in 2026, but most now think they will remain where they are for at least the rest of this year.

BREAKING: Interest rates held at 3.75%

Interest rates are unchanged at 3.75%, the Bank of England has announced.

The hold was widely anticipated by economists, as the Bank’s Monetary Policy Committee (MPC) wait to see how the shock from the Iran war will be reflected in economic data.

Interest rate hold passed by 7 votes to 2

The Monetary Policy Committee voted to hold rates at 3.75%, with seven members supporting the motion, and two members opposing it.

The two members who opposed the hold instead wanted rates to rise by 0.25 percentage points to 4%.

The members voting to raise interest rates were Huw Pill and Megan Greene.

Energy prices were a major concern for the MPC

The minutes of the MPC’s meeting show that the elevated level of global energy prices were a key concern for the committee when deciding where to take interest rates.

They acknowledged that wholesale energy prices have fallen since their previous meeting in April but noted that they still remain higher and more volatile than they were before the Iran war.

They added that the impact of the energy shock on the economy is still uncertain, with concrete data only set to become available in the coming months.

The minutes said: “Monetary policy cannot influence energy prices but is being set to ensure that the economic adjustment to them occurs in a way that achieves the 2% inflation target sustainably.”

Future interest rate decisions set to depend on scale of Iran shock

Where interest rates go next is uncertain and highly dependent on how the economy reacts to the shock from the Iran war, the minutes to the MPC’s meeting showed.

The Bank’s mandate to keep inflation at 2% will require different amounts of intervention from the MPC depending on the rate of inflation later this year.

The minutes show that a potential future rate hike is still on the cards despite more positive developments in the Middle East as the inflationary impact of the war is still set to get worse.

They said: “The policy stance required to achieve this [the 2% target] will depend on the scale and duration of the shock, and how it propagates through the economy.”

Economists at the Bank still expect inflation to accelerate later this year when the effects of higher energy prices pass through to consumers in July through the increased price cap. They are also closely monitoring second-round inflationary effects, which are typically worse the longer higher energy prices persist.

One economic indicator that helps the Bank justify avoiding a rate hike is the softening labour market, which could help “contain inflationary pressures.”

The minutes read: “The Committee will continue to monitor closely the situation in the Middle East and how its impact propagates through the economy. The Committee stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term.”

Bank of England lowers its inflation expectations for 2026

Inflation is expected to remain just below 3% for most of the year, but briefly rise to “a little over” 3.25% in the fourth quarter of 2026, new estimates from the Bank show.

The new estimates are well below the Bank’s April forecasts which expected inflation to peak at 3.6% in their best-case scenario and over 4% in their worst-case scenario.

The downgrade in the Bank’s inflation expectations came after energy prices have fallen since the previous estimates were made, with significant drops coming after it looked like the Iran war was coming to a close.

Lower non-energy prices also helped the Bank revise their inflation forecast down.

BoE: Strong economic growth in Q1 is unlikely to be repeated in 2026

The UK’s strong economic performance in the first quarter of 2026 is unlikely to continue in the rest of the year, the Bank of England has said.

The minutes of the MPC’s meeting showed that this figure overstated overlying economic momentum, which has remained subdued, according to business surveys analysed by the Bank.

April’s GDP figures, which showed the economy shrank by 0.1%, are consistent with this.

Bank staff estimate that underlying GDP growth in Q1 was around 0.2%, and that the economy would continue growing at this rate in Q2.

Base rate held for four consecutive meetings

Today’s announcement that interest rates would stay at 3.75% is the fourth consecutive time the MPC has voted to keep rates where they are.

Compared to interest rates in the last 20 years, 3.75% is relatively high, especially considering rates had been near 0% for years following the 2008 financial crisis.

However, as inflation has remained persistently high since the 2022 energy crisis and the accompanying cost of living crisis, the bank rate has been high for some time. That means that 3.75% is actually the lowest since February 2022.

Bailey: We must tolerate above-target inflation to get back to target

In the minutes of the MPC’s meeting, Andrew Bailey, governor of the Bank of England, justified his vote to hold interest rates.

He argued that the marked fall in energy prices in recent days was a positive sign, especially considering the progress on US-Iran peace talks, but warned “the situation remains unpredictable, and there is clearly a risk that energy prices remain elevated for an extended duration”.

Bailey noted the labour market is showing signs of further softening and said there are further signs of demand weakness in the economy.

He added: “Our remit recognises that attempting to bring inflation back to the target too quickly may cause undesirable volatility in output.

“Given the context at present of softness in the real economy and uncertainty around the scale and duration of the shock to energy prices, tolerating temporarily above-target inflation as part of a return to target is an appropriate way to approach the trade-off, providing inflation expectations remain contained.”

He said that inflation and interest rates risks are on the upside, meaning it is more likely for the bank rate to rise than fall in the foreseeable future.

“I would respond promptly to any signals that an extended period of elevated energy prices could be leading to stronger possible second-round effects,” he added.

Why two MPC members voted to raise interest rates to 4%

While the majority of MPC members voted to keep interest rates held at 3.75%, there were two dissenting voices that wanted to hike rates.

These were Huw Pill, the Bank of England’s chief economist, and Megan Greene, an academic economist and external member of the MPC.

Greene voted to hike rates as she saw the risk of second-round inflationary effects as higher and more uncertain than other members of the committee. To deal with this, she called for the MPC to “pursue a risk management strategy!.

She said the risk of holding rates where they are and second-round effects being more extreme than expected is worse than hiking rates and these effects being as forecast.

She said: “These risks are asymmetric, so we should insure against the possibility of larger second-round effects until we have evidence to determine they are not materialising. A proactive hike now in bank rate should help anchor inflation expectations.”

Pill’s justification was similar, arguing that, with the inflationary outlook so uncertain, raising interest rates to 4% “continues to be the most robust monetary policy response to the intensification of these risks”.

“Global energy prices remain volatile, and elevated compared with their pre-hostilities level, despite the announcement of a new ceasefire. Even with a looser labour market, the risk that second-round effects will create greater intrinsic persistence in UK inflation remains.”

He added that moving the bank rate to 4% now would put monetary policy in a good position to address the uncertainties in the economy.

Deutsche Bank: Interest rates expected to be on “long hold”

Deutsche Bank has said that interest rates are set to stay at 3.75% for a long time, with a lower chance of a rate hike as the economic and geopolitical backdrop has become more favourable and given rise to a wider consensus within the MPC.

Sanjay Raja, the bank’s chief UK economist, said: “For the MPC, recent data outturns combined with an Iran/US deal has meant that the risks around second-round effects have receded. Indeed, while the MPC still sees upside risks to inflation, lower wage and price inflation has given the MPC more confidence that price pressures remain more contained for now.

“Put simply, despite an inevitable inflation wave, the MPC may be willing to tolerate and look through a temporary bump in price momentum.”

Raja added that today’s decision has also helped the MPC keep their options open in the summer, when we will start to see more concrete data about how the Iran war has affected the UK.

“Despite better data and a dramatic fall in energy prices, the MPC avoided sounding too dovish. Instead, it maintained its hawkish bias – keeping flexibility should there be any meaningful signs of indirect and/or second-round effects.

“While financial conditions have tightened since the war began, the MPC's decision today reflects the importance of maintaining some policy restriction in market pricing – allowing it to stick to its 'active hold' strategy.”

As for where interest rates will go next, Raja says the need to act swiftly has reduced as more favourable economic data than expected bought the MPC some extra time to assess the situation.

With that extra breathing space, Raja expects interest rates to stay at 3.75% for the rest of 2026 and adds that Deutsche Bank’s models still see the case for rate cuts in spring 2027.

What does today’s interest rates decision mean for your finances?

Decisions made at the Bank of England to cut, hike, or hold interest rates will affect your personal finances.

This is because the bank rate is the core interest rate in the UK, and is the rate of interest the BoE pays to commercial banks, building societies, and financial institutions that hold money with the central bank.

The bank rate is also the interest rate that the BoE charges on loans made to other financial institutions.

That means that when interest rates change at the BoE, the lending and savings rates offered by retail banks also tend to change.

This is why you may find that your mortgage rate is higher after the bank rate rises, or why you may find your savings are generating less interest when the bank rate falls.

According to data from Moneyfacts, its Average Savings Rate has risen to 3.57%, the highest point since May 2025. “Much of this change to fixed rates is down to speculation that interest rates will remain higher for longer,” said Rachel Springall, finance expert at Moneyfacts.

For more on how interest rates affect your finances, read our article.

MPC remains in ‘wait and see’ mode

Today’s decision to hold interest rates at 3.75% indicates that the MPC is continuing the ‘wait and see’ approach that they have used since the beginning of the Iran war, according to analysis from advisory firm Oxford Economics.

Multiple economic indicators have turned less inflationary in the last few days.

Oil and energy prices in particular are in a better place than any of the BoE’s potential scenarios outlined in their April Monetary Policy Report, with oil and gas futures trending down as the Iran war winds down.

Meanwhile, the labour market has continued to soften, which acts as a further disinflationary force in the economy.

Andrew Goodwin, chief UK economist at Oxford Economics, said that the majority of the MPC who voted to hold rates “appear to take the view that the most likely scenario is that a weak labour market and fragile demand will keep a lid on second-round effects via pay growth and margins. And leading indicators on the strength of those second-round effects will remain key to the MPC’s decision making”.

Like Deutsche Bank, Oxford Economics agree that we are probably going to see interest rates settle at 3.75% until at least next year before a potential cut in late 2027.

Goodwin said: “On balance, we can’t see any reason to change our call that Bank Rate will remain at 3.75% for the rest of this year. The majority of the committee appear content to sit back and see how events play out, and we don’t expect to see leading indicators showing evidence of growing second-round effects that might trigger a change of heart.”

Thank you for following our live coverage of today’s interest rates decision.

We will close our live report now, but make sure to subscribe to MoneyWeek’s newsletters to get a wealth of news, features, and analysis straight to your inbox.

• The Office for National Statistics (ONS) has released UK inflation data for May 2026.
• Consumer Prices Index (CPI) inflation stayed at 2.8% in the 12 months to May, the same as in the previous month’s release.
• Economists had previously predicted a rise in inflation compared to the month prior.
• Lower food prices were one of the main counters to higher transport costs in May.
• The Bank of England’s (BoE) Monetary Policy Committee (MPC) meets this week to decide on UK interest rates and will watch today’s inflation data closely when making its decision.

| UK inflation forecast | What is inflation? | When will interest rates fall further? | CPI release dates | MPC meeting dates |

Good afternoon and welcome to live coverage of the upcoming UK inflation data release.

Tomorrow, we’ll find out how prices changed in the UK during May. Last month’s release showed a slowing of UK Consumer Prices Index (CPI) inflation in the 12 months to April, despite higher oil prices resulting from the conflict in Iran.

While oil prices have fallen this week following the announcement of a peace deal between Iran and the US, the expectation is still that the impact of the conflict will have pushed CPI inflation higher in the period the data covers. How great will the impact be – and what could it mean for your money?

When is UK inflation data released?

The Office for National Statistics (ONS) will release May’s UK inflation data at 7am tomorrow (17 June).

We’ll bring you live reporting and reaction following the release, as well as rolling coverage and expert views on what changes in inflation might mean for you.

What do experts predict for May’s UK CPI?

The headline CPI figure took a surprise dip in April, but few experts anticipate a repeat in the May UK inflation data.

Economists at advisory firm Pantheon Macroeconomics expect CPI inflation to have risen to 3.0% in May, due to the impact of recovering air fares and vehicle duty base effects.

“Most of the action comes in services,” said Pantheon Macroeconomics’ chief UK economist Robert Wood and senior UK economist Elliott Jordan-Doak in a report seen by MoneyWeek. “Non-core components should add 1 basis point to inflation in May compared to April, and core goods will shave off 6 basis points.”

Similarly, Sanjay Raja, chief UK economist at Deutsche Bank, expects CPI to rise to 3%, with most of the uplift driven by services inflation.

Both Deutsche Bank and Pantheon Macroeconomics forecast services inflation to rise from 3.2% to 3.7%.

Notably, both organisations forecast a lower rate of UK inflation for May than the MPC itself. In its latest report (published in April), the MPC forecasted CPI to rise by 3.3% in the year to May, driven largely by a 3.9% rise in services inflation.

UK inflation data to be followed by interest rates decision

UK inflation data is released once per month, and the Bank of England’s (BoE) Monetary Policy Committee (MPC) meets every six weeks to set UK interest rates.

This means every other MPC meeting and every third inflation data release coincide. Inflation data is released on Wednesdays and the MPC’s decision is posted on Thursdays, so when this happens the MPC announces its decision the day after inflation data is released.

That’s the case this week; the MPC’s interest rate decision will be announced on Thursday 18 June. The committee will factor tomorrow’s inflation data closely into its decision.

“Absent some huge surprises in this week’s inflation and labour-market figures, we think the MPC will say at Thursday’s policy meeting that they remain prepared to act but feel they can keep rates on hold for now,” said Robert Wood and Elliott Jordan Doak, chief UK economist and senior UK economist respectively at advisory firm Pantheon Macroeconomics, in a note seen by MoneyWeek.

Why small changes in inflation make big differences to your finances

Inflation measures the rate at which prices rise or, from another perspective, the rate at which money falls in value. One pound today buys less than it did ten years ago.

The MPC targets a 2% rate of inflation. This is generally viewed by economists as a healthy rate of inflation (too little inflation or, worse, deflation are signs of a weakening economy).

The difference between 2% inflation and 3% might sound trivial, but over the long term it has a surprisingly large effect on your money.

“People often assume there isn't much difference between low rates of inflation, but the rule of 72 shows how it can mount up,” says MoneyWeek’s editor Andrew VanSickle. “At 4%, your money takes only 18 years to halve in value. At 3%, 24 years. At 2% – the Bank of England's target – 36 years.”

UK inflation data history

The peak for UK inflation in recent history came in October 2022, when the headline CPI inflation measure hit 11.1%.

CPI inflation fell below the Bank of England’s 2% target in September 2024, before rising steadily over the next year.

Until the war in Iran broke out, inflation had been trending downwards. The war’s outbreak, though, pushed UK inflation to 3.3% in March this year – ahead of the dip in April.

Could the Iran ceasefire ease UK inflation in time to avert rate hikes?

The MPC will look closely at tomorrow’s UK inflation data when it meets this week. But this data is backward-looking – reflecting what happened to UK prices in May. The committee will also pay close attention to what is likely to happen to inflation going forward.

With that in mind, the ceasefire between the US and Iran, and the resulting re-opening of the Strait of Hormuz, could have come at the perfect time for rate-setters who had appeared set to decide between hiking rates, which risks stifling an already weakening economy, and cutting or holding them which could risk letting inflation get out of control.

“Falling oil prices have arrived at a convenient moment, giving both the [Federal Reserve] and the Bank of England something to work with ahead of their meetings this week,” said Chris Beauchamp, chief market analyst at investing and trading platform IG. “Cheaper energy takes pressure off inflation, and that should allow both central banks to strike a more measured tone than some of the more excitable commentary and market pricing seen since the US and Iran went to war.”

Your personal inflation rate

CPI inflation is just one way of measuring inflation. It is the headline rate measured by economists and policymakers largely because, of all the metrics, it is one of the easiest to compare internationally. For more information on different inflation measures, see our explainer on CPI vs RPI inflation.

All inflation measures have one thing in common: they distil an immensely complex combination of goods and prices across the whole economy into a single number. While that number in theory represents the economy as a whole, different people with different spending patterns will experience inflation differently from one another.

Everyone has their own personal inflation rate. You can calculate yours by answering a series of questions at the ONS’s personal inflation rate calculator.

“My personal inflation benchmark is the peppermint Aero,” says MoneyWeek’s editor Andrew VanSickle. “I paid 22p in 1988. Now it's 63p or so.”

Thank you for following today's live reporting ahead of tomorrow's UK inflation data release. We're pausing coverage here for this evening, but we'll be back live tomorrow morning to bring you the May inflation data as soon as it breaks at 7am.

Good morning, and welcome back to our live coverage of the upcoming UK inflation data release.

As a reminder, the Bank of England most recently forecasted a rise in Consumer Prices Index (CPI) inflation to 3.3%, though some economists believe that inflation will have been cooler at 3.0%.

We'll bring you the headline figure as it happens, as well as rolling reaction and analysis following the release.

UK inflation data release imminent

The May UK inflation data release is just minutes away. Will inflation have risen, and by how much if so?

BREAKING: UK inflation stays at 2.8% in May

UK inflation as measured by the Consumer Prices Index (CPI) stayed constant at 2.8% in the 12 months to May 2026.

Lower food prices lead to surprisingly flat UK inflation

UK CPI inflation, which was expected to have risen in the 12 months to May compared to the previous month, has instead stayed flat with lower food prices counteracting increased transport costs.

“After last month’s slowdown, inflation held steady in May as various price movements offset each other,” said Grant Fitzner, chief economist at the Office for National Statistics (ONS).

“The main upward movement came from transport with airfares, vehicle taxes and petrol prices all pushing up inflation,” Fitzner continued. “These were offset by lower food prices, with decreases in inflation seen across a range of meat, dairy and vegetable items compared to last month, as well as the cost of domestic heating oil, which fell back after climbing in recent month[s].”

UK inflation in detail

Let’s have a look at some of the other UK inflation figures beyond that headline 2.8% rate of annualised CPI inflation.

While annualised CPI inflation held steady in May, on a monthly basis the metric increased by 0.2% from April, the same rate as in May 2025.

The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 3.0% in the 12 months to May 2026, unchanged from the 12 months to April.

CPIH also rose by 0.2% in May 2026 – the same monthly rate as in May 2025.

Core CPI (CPI excluding volatile goods like energy, food, alcohol and tobacco) rose by 2.6% in the 12 months to May 2026, up from 2.5% in the 12 months to April.

As had been predicted, CPI services inflation rose from an annual rate of 3.2% to 3.7% between April and May.

Could the Iran inflationary shock be short-lived?

When looked at in historical context, there is very little sign of a bump in inflation linked to the Iran war.

“UK inflation was flat during May, coming in below expectations despite higher energy prices continuing to weigh on UK households and businesses,” said Scott Gardner, investment strategist at J.P. Morgan Personal Investing. “This reading will provide some hope that any rebound in UK inflation could be short-lived after the announcement of a framework deal earlier in the week between the White House and Iran to stop fighting.”

Other experts are striking a more cautious tone, though.

“Despite energy prices having fallen recently, there is more inflationary pressure to come for the UK, when the Ofgem price cap moves higher next month,” said Luke Bartholomew, deputy chief economist at asset manager Aberdeen.

Rachel Reeves: Economic plan is controlling inflation

The chancellor of the exchequer Rachel Reeves has responded to today’s inflation figures.

“While the war in the Middle East pushes prices up globally, we have got the right economic plan and inflation has held steady,” said Reeves.

“We’re protecting families and businesses from rising costs, with cuts in energy bills and freezes in fuel duty and rail fares.”

Reeves’s statement drew attention to measures that the government has brought in including targeted support on heating oil, reduced tariffs and an extension of the fuel duty cut to December 2026.

Which categories had the biggest impact on UK inflation?

Different categories of goods and services had contrasting effects on UK inflation during May.

Transport had the largest upward impact on an annualised basis, rising 6.8% in the 12 months to May and contributing 0.29 percentage points to 12-month CPI inflation. On a monthly basis transport costs increased by 0.4% in May, having fallen 1.8% in April.

Conversely, the price of food and non-alcoholic beverages fell 0.1% during the month, which led to this category lowering annualised CPI inflation by 0.09 percentage points. While furniture and household goods prices increased 0.8% between April and May, they fell by 0.1% over the preceding 12 months, meaning this category reduced annualised CPI inflation by 0.04 percentage points.

Unchanged UK inflation suggests price pressures are ‘finely balanced’

The easing of food price pressures indicates that, beneath the headline impacts of higher energy prices, there is a longer-term disinflationary trend at play, according to Richard Flax, chief investment officer at wealth manager Moneyfarm.

“It was a modest positive surprise to see UK headline inflation hold at 2.8% in May, as consensus expectations had pointed to a move closer to 3%,” said Flax. “This suggests underlying price pressures remain more finely balanced than anticipated.”

Middle East disruption could still lead to higher UK inflation

Experts are warning UK consumers not to get carried away with the idea that the UK has escaped the inflationary risks resulting from the war in the Middle East, even following the peace deal negotiated between Iran and the US.

“Despite a peace deal being reached, disruption to global energy markets and related supply chains is yet to work its way through the system,” said Rob Morgan, chief investment analyst at wealth manager Charles Stanley. “Households still need to brace themselves for pricier shopping baskets and energy bills in the coming months.”

Despite this the reopening of the Strait of Hormuz “is undoubtedly good news for consumers, business owners and central banks alike”, Morgan added. “It means that the price jolt won’t be as ferocious as it might have been, and it could give way to a calmer inflationary setting next year… it’s far from a ‘worst case’ inflationary scenario for UK households and businesses.”

UK inflation outlook looks softer, says Deutsche Bank chief economist

Investment bank Deutsche Bank’s chief UK economist, Sanjay Raja, has highlighted the benign outlook for UK inflation implied by today’s release.

“Outside of services CPI, headline, core, and food prices [inflation] all undershot our expectations,” said Raja.

“Driving some of the downside in price momentum was a combination of weaker core goods prices and food prices. Indeed, despite rising energy costs, retailers remain hesitant to price in any cost pass-through.”

The easing of pricing pressures on these goods coincides with the apparent resolution to the conflict in the Middle East, which has already seen oil prices fall to around 10% below last month’s market assumptions.

“This will slowly flow through the inflation data over the summer and winter,” said Raja. “And, in even better news, the fall in oil prices has coincided with a fall in gas prices. It’s looking increasingly likely that the Ofgem Price Cap could be lower as opposed to higher come October 2026, bringing some much-needed relief for UK households and businesses.

“Altogether, the sting from the Iran conflict looks less than markets initially assumed,” Raja added. “The peak in CPI could end up well below what we saw last year.”

UK inflation recap

Here’s a recap of the main talking points from this morning’s UK inflation data release:

• CPI inflation was 2.8% in the 12 months to May, unchanged from the previous month.
• While transport costs rose, food prices fell month-to-month which contributed to the lower-than-expected figure.
• CPI services inflation rose to 3.7%, maintaining upward pressure on UK inflation more broadly.
• CPI rose by 0.2% on a monthly basis.

What does inflation mean for your money?

You’ll have already felt the impact of the May inflation figures the ONS has announced today when you bought travel tickets, food and drink or petrol last month. Inflation figures are backward-looking and reflect what people across the economy spend on everyday goods and services.

But beyond straining your monthly budget there are indirect consequences for your money when inflation runs above the 2% level that the Bank of England (BoE) targets.

First and foremost among these is the impact on interest rates. The BoE’s Monetary Policy Committee is meeting this week to decide on interest rates. Higher inflation incentivises central bankers to raise interest rates, which would increase the interest you pay on any debt (including your mortgage) but would also increase the amount of interest you could accrue on savings and cash.

Higher inflation also puts up any utility bills you have that are inflation-linked. Many contracts have a clause allowing them to increase by the rate of annual inflation (often this is based on the Retail Prices Index (RPI) rather than CPI).

State pensioners also potentially stand to benefit, as the triple lock means that state pension payments increase by whichever is highest out of CPI inflation, average wage growth or 2.5%.

Inflation reality checks

UK inflation undercut expectations in May and that’s a cause for optimism in many respects. Before we get carried away though, various experts have cautioned that the trouble may not be over yet.

“On the face of it, a flat 2.8% reading on headline UK inflation, against a 3% expectation, and almost all of which attributed to transport costs, is good news,” said George Lagarias, chief economist at financial consultancy Forvis Mazars. But despite this and the anticipated impact of a peace deal between the US and Iran, Lagarias warned that “businesses should not casually overlook the jump in services inflation from 3.2% a month ago to 3.7%.”

Sarah Coles, head of personal finance at investment platform AJ Bell, also highlighted that some categories such as motor fuel and pet ownership have seen significant inflation, while cumulative impacts of inflation can mount up over time.

While the US-Iran peace deal could mitigate inflation in future, “there are no guarantees that the deal will hold, and even if peace endures, price rises are already baked in through higher input costs”, said Coles.

Those on lower incomes are also disproportionately impacted by things like higher energy costs, as a greater proportion of their household income goes on energy-sensitive spending.

“The ONS Family Spending figures out last week showed that the 20% of households with the lowest disposable income spent 15.2% of their budget on food and drink – compared to 7.9% among the highest 20%. They also spent 7.8% on gas and electricity, compared to 3.9% among the richest fifth, and 2.5% on petrol, diesel and motor oils, compared to 2.1%,” said Coles.

What does the latest UK inflation data mean for interest rates?

The biggest question from here is what impact today’s inflation data might have on UK interest rates.

The Bank of England’s Monetary Policy Committee (MPC) is meeting this week, and tomorrow it will announce its latest interest rates decision.

We’re ending live inflation coverage here – but don’t worry, we’ve got a separate live report covering the MPC’s decision. Keep a close eye on that today and tomorrow as we bring you rolling news, insight and analysis of the announcement.

• The consumer prices index (CPI) rose by 2.8% in the 12 months to April 2026
• The latest Office for National Statistics (ONS) data shows that inflation dipped in the year to April, down from 3.3% in March
• Despite this, the Iran war is still expected to push up prices for Brits as global supply lines continue to operate under strain
• The Bank of England is unlikely to be moved to cut rates despite a lower inflation rate today

| What is inflation? | CPI vs RPI inflation | When will interest rates fall further? | CPI release dates | MPC meeting dates |

ONS set to publish April’s inflation reading at 7am tomorrow (20 May)

Good afternoon, and welcome to MoneyWeek’s live coverage of April’s inflation figures.

The data is expected to show that inflation dipped in the year to April, but only because of negative base effects as April 2025’s reading was unusually high.

As we approach the release, we will cover the latest forecasts, analysis, and break the news when the figures drop tomorrow morning.

What was inflation in the year to March?

The ONS publishes inflation data monthly, with the March Consumer Price Index (CPI) data released on 22 April.

The data showed inflation rose by 3.3% in the 12 months to March, up from 3% in the year to February. The rising price of motor fuel was the main driver of the increase in the CPI rate, the ONS said.

In February, the Bank of England’s Monetary Policy Committee said inflation would slow to 2.1% by April, but these expectations have been quashed due to the conflict in the Middle East, which has pushed inflation up.

How high could inflation go in 2026 and 2027?

In its latest Monetary Policy Summary, the Monetary Policy Committee said inflation could hit a peak of 6.2% by early 2027, under a worst case scenario.

The report described three situations that could occur due to rising prices caused by the conflict in the Middle East.

In Scenario A, inflation would rise to 3.6% at the end of 2026, while under Scenario B, it would hit 3.7% by the end of this year.

However, under Scenario C, inflation could reach as high as 6.2% by the first quarter of 2027, based on energy prices remaining elevated for a prolonged period.

Could inflation fall in April?

The conflict in the Middle East is expected to put a damper on the UK economy, hitting GDP growth, interest rates and inflation.

March’s inflation data, which saw a 0.3 percentage point rise on the month, pointed to this.

However, economists at Deutsche Bank say they don’t anticipate inflation to rise again in April’s data – rather, they expect a fall.

This prediction is not because they think the UK economy will be more resilient. It is because of negative base effects on the data.

These are expected to arise as April 2025’s inflation data was unusually high because of a tranche of bill increases.

As CPI inflation is measured as the change in prices over a 12 month period, that means April 2026’s data will be compared with April 2025’s data.

This is expected to result in a brief fall in inflation in April, which is then expected to be reversed in May.

Sanjay Raja, chief UK economist at Deutsche Bank, said he thinks April’s data will show inflation “drop from March as negative base effects drag on the annual price calculation.”

He added: “Put simply, annual price resets won't be as large this year as they were last year – especially in the services basket.

“The bad news? Prices will remain well above the Bank of England's 2% target. Indeed, only three months ago, forecasters, including us, were expecting CPI to drop to around 2% y-o-y in April.”

Deutsche Bank expects inflation to slow to 2.98% in April and then bounce back up in the following months.

Raja added: “Looking ahead, we expect price momentum to pick back up as the Iran shock catches up with the inflation data. Indeed, dual fuel bills won't rise until the summer. Rising food and core goods inflation, we expect, will also push momentum a tad higher.”

Thank you for following our preview coverage of tomorrow's UK inflation figures this afternoon.

We are pausing our live report for now, but join us at 7am tomorrow when we will report the latest inflation news, analyse the figures, and bring you expert commentary.

In the meantime, we want to hear your thoughts on where you think inflation will go in April. Voice your opinion in the poll below.

Good morning and welcome back to MoneyWeek's live report for the April inflation reading. The Office for National Statistics (ONS) will release the figures shortly, at 7am.

Where is inflation expected to go?

Inflation, as measured by the Consumer Prices Index (CPI), came in at 3.3% in March 2026, up from 3% in February.

UK inflation is expected to accelerate in 2026 as the economy is impacted by the conflict in the Middle East.

That said, economists expect April’s figure, which will be published shortly, to ease slightly, as inflation in April 2025 was unusually high.

This would not mean prices are falling, but rather, prices are rising year-on-year at a slower rate than they were the month before.

UK inflation slows to 2.8%

The consumer prices index (CPI) rose by 2.8% in the 12 months to April 2026, down from 3.3% in the 12 months to March, the ONS said.

On a monthly basis, CPI rose by 0.7% in April 2026, compared to a rise of 1.2% in April 2025.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3% in the 12 months to April 2026, down from 3.4% in March.

CPIH rose by 0.8% in April 2026, on a monthly basis, compared to an increase of 1.2% in April the year before.

Chancellor Rachel Reeves to set out plans to support UK households

Chancellor Rachel Reeves has insisted the government has "the right economic plan" and will announce further ways to support UK households tomorrow.

She said: “The war in Iran is not our war but one we will need to respond to, and the decisions I took in the Budget last year have kept inflation down as we deal with global instability. We have the right economic plan, and to change course now would risk our economic stability and leave working people worse off.

“We have already taken £117 off energy bills, frozen rail fares, and lifted the two-child limit, and over today and tomorrow I’ll set out the next phase of how we will support UK households.”

Prior to the conflict in the Middle East, which began at the end of February, inflation was forecast to fall to around the 2% target this month.

Shadow chancellor Mel Stride: "Prices still rising too fast"

Shadow chancellor Mel Stride has welcomed the fall in inflation to 2.8%, but said prices are still rising too quickly.

Writing on X, he said: "Any fall in inflation is welcome, but prices are still rising far too fast and Labour have left our economy weak and exposed to the impacts of the Iran war.

"The recent spike in borrowing costs shows markets are increasingly worried about Labour’s leadership chaos and economic mismanagement, leaving families to pick up the bill for a £300 Burnham Penalty.

"Only the Conservatives have a leader with the backbone and strong team needed to restore confidence and bring debt down through our Golden Economic Rule."

What drove the UK inflation rate in April 2026?

Housing and household services largely drove the easing of inflation, for both CPI and CPIH inflation.

The big rise in motor fuel prices increased the rate of inflation, but this was offset by a fall in prices from other categories in the transport division.

Energy prices drive easing of inflation in April

The 12-month rate for housing and household services was 3% in April 2026, down from 4.3% in the month before. The easing reflected electricity prices falling – dropping by 8.4% in April 2026 compared with a rise of 2.9% a year ago.

Ofgem’s energy price cap fell by 7% on 1 April. The average price cap household paying by direct debit for dual fuel will pay £1,641 per year this quarter, £117 per year less than the quarter before.

The price cap fell partly because global wholesale energy prices dropped in the 12-week assessment period Ofgem used to calculate the April price cap – this was before the outbreak of the conflict in the Middle East.

It also dropped as the UK government removed a number of green levies from household bills, instead funding them through general taxation.

Clothing and footwear inflation rate rebounds

Clothing and footwear prices increased by 0.7% in the annual figure, compared to a fall of 0.8% in the 12 months to March.

Motor fuels inflation rate highest since September 2022

Prices in the transport division rose overall by 4.5% in the April ONS data, down from 4.7% in March. The increase was predominantly driven by motor fuels but partially offset by falling air fares and a downward effect from vehicle excise duty (VED).

The average price of a litre of petrol increased by 16.6 pence between March and April 2026, reaching 156.8p – the highest price since November 2022.

The price of a litre of petrol fell by 3.0 pence in the same period the year before.

Diesel prices increased by 31.3 pence per litre in April 2026, to 190.0 pence per litre – the highest price since July 2022. Diesel prices fell by 3.1p per litre in April 2025.

These changes meant overall motor fuel prices rose by 23% in the 12 months to April 2026, compared to a rise of 4.9% in March. The motor fuels inflation rate was its highest annual increase since September 2022.

What does inflation mean for you?

While April’s data shows inflation has fallen to 2.8%, this easing is only forecast to be temporary, given the backdrop of the war in the Middle East.

Furthermore, slowing inflation doesn’t mean prices are falling. Rather, prices are still rising year-on-year, but just at a slower pace in April.

“Many households facing sustained financial pressure are unlikely to feel much relief, “Harriet Guevara, Chief Savings Officer at Nottingham Building Society, said.

"Beneath the headline figure, rising fuel and food prices alongside continued volatility in global energy markets mean that the path back to the Bank of England’s 2% target is unlikely to be straightforward.”

Impact of inflation on your savings

Inflation may have eased from previous highs, but it’s still pushing up costs, and money held in low-interest rate accounts could lose spending power over time.

Households should review whether they’re getting a competitive interest rate on their savings, make the most of tax-free allowances and consider creating an emergency fund, which covers three to six months’ of essential spending.

“With continued uncertainty around inflation and interest rates, building financial resilience should remain a priority,” Guevara said.

“Whether it’s creating an emergency fund, saving towards a home or planning for the future, taking proactive steps now can help households feel more secure in the months ahead.”

The average savings rate is currently 3.55%, according to money comparison website Moneyfacts.

There are currently 1,806 savings accounts that beat inflation – made up of 202 easy access, 178 notice accounts, 180 variable rate ISAs, 410 fixed rate ISAs and 836 fixed rate bonds.

In May last year, there were just 1,326 savings accounts which beat inflation, which was then at 3.5% (April 2025 CPI).

To avoid inflation-battered returns, “savers need to take a more proactive approach by reviewing deals frequently, making use of their tax-free cash ISA wrappers and avoiding apathy with long standing accounts that pay below average returns,” Caitlyn Eastell, personal finance analyst at Moneyfactscompare.co.uk, said.

We list the best savings accounts for top interest rates in a separate piece.

How some key household staples increased in April

While inflation fell in April, many households will have noticed increased pressure on their budgets lately. Petrol prices, for instance, shot up by 16.6% on average between March and April.

"While energy prices have dragged down the overall headline figure, lurking in the data are a myriad of painful price rises," Sarah Coles, head of personal finance at AJ Bell, said.

We look at some of the other household essentials which jumped in April.

Water

Water bills helped to bring down the overall inflation figure, although they still increased by 9% in a year, while sewerage costs increased by 5.8%. However, the price rises were a lot lower than the water bill hikes in April 2025 – when water bills rose by 26.4% and sewerage was up 25.9%.

Heating oil

While energy bills fell for millions of households on the energy price cap in April, those relying on heating oil saw prices soar. The war in Iran meant prices rose 8.5% in April, compared to a fall of 7.7% a year ago.

Food and non-alcoholic drinks

Food and non-alcoholic beverage price inflation eased in April – prices rose by 3% in the 12 months to April 2026, down from 3.7% in the 12 months to March.

The slowing of food and drinks inflation was due to five of the 11 food and non-alcoholic beverage classes:

• Meat – down 0.03 percentage points
• Sugar, jam, honey, syrups, chocolate and confectionery – down 0.03 percentage points
• Oils and fats – down 0.01 percentage points
• Coffee, tea and cocoa – down 0.01 percentage points
• Mineral waters, soft drinks and juices – down 0.01 percentage points

However, this was partially offset by an increase in the following classes:

• Vegetables – up 0.01 percentage points
• Milk, cheese and eggs – up 0.01 percentage points.

McKinsey: Years of high food inflation have changed consumer behaviour

One of the clearest ways consumers feel the impact of high inflation is in their food shop. In the year to April, food inflation rose by 3%, while it rose by 3.7% in the year to March.

Food inflation has been so high for so long that the average price of your food shop has risen by a staggering 30% in just the last six years, research by management consultants at McKinsey has found.

For example, if you spent £100 on your weekly food shop in 2020, you would be paying around £130 for the exact same items on average today.

These soaring prices are affecting how we approach our food shop.

Pieter Reynders, partner at McKinsey & Company, said: “These years of elevated food costs are leaving a lasting imprint on consumer behaviour. Even as some inflationary pressures begin to ease, households still feel they need to continually weigh up what represents good value in everyday spending. That means reassessing brands, formats, and price points with a sharper level of scrutiny.”

Where will inflation go next?

With inflation coming in significantly lower than the previous month, and even lower than many economists’ forecasts, it is tempting to hope that price growth will continue to slow. However, that would be misguided.

This slump in inflation is likely to "prove fleeting”, according to Sanjay Raja, chief UK economist at Deutsche Bank, as external price pressures will continue to push up price growth.

He said: “Given the prolonged closure of the Strait of Hormuz, energy prices remain elevated. Oil prices will likely rise a little further in the coming months. And gas/electricity prices will catch up to market pricing as soon as July, when the next Ofgem price cap kicks in.”

These are upwards pressures on inflation, and each of them come as a result of the war in Iran, which the UK has little control over.

As virtually all sectors are exposed to changes to oil and energy prices, we can expect more price increases to trickle down as increased production costs are passed on to consumers.

Raja added: “What’s more is that we are seeing continued signs of rising indirect price pressures. Higher commodity prices will likely see food prices rise further. And core goods prices will also – at some stage – be less insulated from ongoing price rises.

“To be sure, despite today’s encouraging CPI print, there’s still a lot of upward pressure yet to come across to headline inflation – as evidenced by today’s bumper producer price prints.”

BREAKING: Fuel duty freeze extended as petrol and diesel prices soar, PM says

The freeze on the rate of fuel duty has been extended again, prime minister Keir Starmer has announced, as prices at forecourts have risen across the country.

Chancellor Rachel Reeves will extend the 5p cut in the rate of fuel duty until the end of the year, helping keep costs at the pump down as price pressures due to the Iran war are pushing up the price of petrol and diesel.

The freeze had been due to start unwinding from September.

The government says that with the freeze extended until the end of the year, it is expected to have saved the average UK driver around £120 since 2025.

Starmer said: “I know many are feeling the pressure of energy and fuel costs, and are worried about how the conflict in Iran will affect their finances. Because when global events drive up prices, it’s working people who feel it first.

"That’s why this government is stepping in to keep fuel costs down for millions of drivers and putting money back in the pockets of working people.”

The 5p cut to fuel duty was intended as a temporary measure following Russia’s invasion of Ukraine in 2022, but it has remained as fuel prices remained higher for longer.

In her 2025 Autumn Budget, the chancellor said the government would gradually get rid of this 5p cut, tapering it away by 1p in September, 2p in December. It would be scrapped entirely by March 2027.

However, as the Iran war has caused petrol and diesel prices to hit a three-year high, the government has extended the 5p cut.

Fuel duty freeze extension comes as fuel prices are at highest level since December 2022

The fuel duty freeze extension comes at a time when fuel prices are under extreme pressure as global oil supply lines are heavily disrupted.

As oil is used in the production of both petrol and diesel, any increase in the price of oil is reflected in the price you pay at the pump.

Since 28 February, when the Iran war began, the average price of a litre of petrol has gone up to 158.73p as of 20 May. That is 25.9p more than it was before the conflict and is expected to keep rising.

It has brought the price of petrol in the UK to its highest level since December 2022, in the wake of Russia’s invasion of Ukraine.

The problem is even worse for those who drive diesel vehicles. The average price of the fuel has grown to 185.73p a litre, a rise of 43.4p in the same time period, though is trending downwards.

At its worst, the price of a litre of diesel was 49.2p a litre higher than before the conflict on 15 April.

Freeze will ‘provide respite’ to motorists but further action may be needed

The government’s decision to extend the freeze on fuel duty has been welcomed by many in the motoring industry as the subsidy will help ease the burden on drivers.

John Cassidy, managing director at Close Brothers Motor Finance, welcomed the policy, saying the decision “will provide some respite to motorists.”

However, he added that despite this, events in the Middle East means that drivers will continue to feel the pinch.

He said: “With 42% of motorists stating that they have been worried about further petrol price rises, the announcement should go some way to alleviating financial stress. However, many will see this as papering over the cracks of much wider concerns, and will expect the Government to implement further measures to ensure drivers can afford the cost of driving - something that is essential to the daily lives of millions.”

Thank you for following our coverage of today’s UK inflation data release and the surprise extension to the fuel duty freeze.

We’re ending today’s live coverage here, but keep an eye on the MoneyWeek website and subscribe for email updates as we bring you more inflation and fuel duty news and reaction.

Summary

• The MPC’s base rate decision for April was released today (30 April) at 12pm
• Prior to the conflict in the Middle East, the Bank of England had been forecast to cut interest rates twice in 2026
• Rising inflation has caused economists to reconsider their predictions for the year
• When the Bank of England’s Monetary Policy Committee (MPC) met in March, it held rates at 3.75%

| UK inflation forecast | MPC meeting dates | Is the UK heading for stagflation? |

Good afternoon and welcome to our live coverage ahead of the Bank of England’s Monetary Policy Committee announcing its latest base rate decision tomorrow (30 April).

Stay with us as we bring you all the latest news, analysis and reaction.

What is the current bank rate?

The Monetary Policy Committee, which is responsible for setting the base rate, decided to hold interest rates at 3.75% when it last met in March.

In a rare decision, the committee voted unanimously to hold interest rates, citing the increase in global energy and commodity prices caused by the conflict in the Middle East.

It said it would continue to monitor the situation in the Middle East “closely” and its impact on wholesale energy costs.

When does the MPC meet to decide UK interest rates?

The Monetary Policy Committee meets today, Wednesday 29 April, but the decision made by the committee’s nine members won’t be released until tomorrow at midday.

The announcement comes alongside a report detailing how each member voted and why they decided to lower, raise or hold rates.

Keep with us as we’ll announce the committee’s decision as soon as it’s confirmed at 12pm.

Why the MPC might hold UK interest rates

Given the degree of uncertainty over the eventual fallout from the conflict in Iran, and the UK’s precarious economy, some experts think that the MPC will once again err on the side of caution and hold UK interest rates unchanged.

“We expect the MPC to lean heavily into the uncertainty angle on Thursday,” said Matthew Ryan, head of market strategy at financial services firm Ebury. “In our view, it remains too soon for the bank to both assess the effect of the energy price spike on second round inflation, and have a clear timeline for when oil traffic will resume through the Strait of Hormuz.”

Holding UK interest rates unchanged would have the added benefit of signalling to markets that the MPC is willing to move UK interest rates in either direction, depending on how events unfold.

“[Bank of England governor Andrew] Bailey could again gently push back against market pricing for hikes, but we do not expect the statement to rule anything out,” Ryan added.

Who are the nine members of the Monetary Policy Committee?

The Monetary Policy Committee is made up of nine members - the governor, three deputy governors for monetary policy, financial stability and markets and banking, a chief economist and four external members appointed by the chancellor, currently Rachel Reeves.

External members are appointed by the chancellor to ensure outside voices are heard within the MPC.

A representative from HM Treasury also sits with the MPC at its meetings and can discuss policy issues, but is not allowed to vote.

These are the current nine members of the MPC:

• Andrew Bailey - governor
• Sarah Breeden - deputy governor, financial stability
• Clare Lombardelli - deputy governor, monetary policy
• Huw Pill - chief economist and executive director, monetary analysis
• Sir Dave Ramsden - deputy governor, markets and banking
• Dr Swati Dhingra - external member
• Megan Greene - external member
• Professor Alan Taylor - external member
• Catherine L Mann - external member

Where have interest rates been since 2008?

Interest rates spent years below 1% in the aftermath of the 2008 Financial Crisis, but started shooting up in 2022 as the Monetary Policy Committee looked to tame runaway inflation.

Three major factors caused inflation to surge in 2022, according to the Bank of England: countries emerging from coronavirus lockdowns which released pent up demand for products and services, Russia’s invasion of Ukraine, which saw energy and food prices soar, and a shortage of workers in the UK post-Covid which raised the cost of hiring (some businesses put their prices up to cover these costs).

In response, the Monetary Policy Committee voted for a number of interest rate hikes in 2022 and 2023, with bank rate hitting 5.25% at its peak.

Inflation has since slowed, meaning the committee has been able to steadily lower interest rates to 3.75%.

However, the inflationary effect of the conflict in Iran and the Middle East has dented hopes rates could fall again in 2026.

What do you think the Monetary Policy Committee's decision will be?

It’s time for you to have your say. Do you think interest rates will be lowered, held or raised tomorrow?

Where is inflation forecast to go in 2026?

Inflation has a bearing on what the Bank of England decides to do with interest rates, but where are experts and economists predicting it will go?

In its March report, the Monetary Policy Committee forecasted the Consumer Price Index (CPI) measure of inflation could increase to 3.5% by July (Q3).

The International Monetary Fund (IMF) is also expecting inflation in the UK to rise to 4% in 2026.

The Food and Drink Federation, the UK trade body for food and drink manufacturers, has said food inflation could hit as high as 9% by the end of the year.

How does base rate affect inflation?

The Bank of England uses interest rates as a lever to control consumer spending, which can influence price rises.

Higher interest rates generally lead to higher charges on mortgages and loans, meaning people spend more on them and less on other things, like goods and services.

They also see savers getting bigger returns on their savings which can incentivise people not to spend money and stash it away instead.

When people spend less, businesses are generally less willing or able to raise their prices, which keeps inflation lower.

Lower interest rates can have the opposite effect, making it cheaper to borrow money and take out a loan or mortgage.

Savers also get a smaller return on their savings so may feel it is more worthwhile to spend their money rather than save it. All of this can stimulate consumer spending and push up inflation.

The government sets the Bank of England a 2% target for inflation because low-level inflation is generally seen as more positive than deflation, where prices fall.

Energy prices forecast to rise in July – why the Bank of England is so concerned about inflation

A large reason the Bank of England is concerned about inflation is because of energy prices.

A focal point of the conflict in the Middle East has been the Strait of Hormuz, through which around 20% of global petrol and 20% of the world’s gas goes through each year.

The strait has effectively been blocked since the start of the conflict, which has pushed up wholesale prices.

This is expected to feed into energy prices from July, when the new price cap comes into effect. Ofgem will announce what the cap is on 27 May.

However, forecasts from consultancy Cornwall Insights, which is well-regarded for its price cap predictions, say the July price cap will rise to £1,836 per year – an increase of more than 12% from the current cap.

It is a major contrast to where the consultancy expected energy prices to go before the conflict began, when it forecasted them to rise modestly to an average of £1,645 a year, broadly the same as the current price cap.

Goodbye for now

Thanks for following our coverage ahead of the bank rate announcement tomorrow (30 April).

We’re going to end our live reporting for today and we’ll be back tomorrow first thing to bring you more reaction and analysis.

Make sure you keep an eye on the MoneyWeek website for all the latest investment and personal finance news.

Welcome back

Good morning and welcome back to our live coverage ahead of the Bank of England’s Monetary Policy Committee’s (MPC) bank rate decision today.

The MPC’s decision will be confirmed at 12pm, so stay with us for rolling analysis and commentary following the announcement.

A quick recap

If you’ve not been with us since our coverage started yesterday, here’s what you’ve missed.

The Monetary Policy Committee will have been weighing up the inflationary effects of the conflict in the Middle East when deciding whether to lower, hold or raise bank rate.

Economists and experts mostly believe rates will be held as policymakers take a wait and see approach.

Sanjay Raja, chief UK economist at Deutsche Bank, said: “We don't expect any change to bank rate in the April meeting (3.75%). Instead, we see the upcoming meeting as a 'risk posturing' event – with the Bank (of England) laying bare the risks to the economic outlook as a result of the energy shock.”

Quiz question: What is the current rate of inflation?

It’s time to test your knowledge and see how much you’ve been paying attention to the latest macroeconomic news.

What is the current rate of Consumer Price Index (CPI) inflation (as of March 2026)?

What has Andrew Bailey said about interest rates?

The governor of the Bank of England, Andrew Bailey, has said despite energy prices rising as a result of the conflict in the Middle East, the Bank of England would not rush to make any decisions on interest rate rises.

Speaking at a meeting of the International Monetary Fund (IMF) earlier this month, Bailey said the MPC would not “rush to judgements” on rates because the impact of higher energy prices could cause inflation to spike but also stunt economic growth, the BBC reported.

“There are a lot of uncertainties around this, not just how it's going to play out, but also how it's going to pass through into the UK economy,” he said.

Oil prices hit four-year high

The price of oil hit a four-year high last night (29 April) after US president Donald Trump told aides to prepare for an extended blockade of Iran, according to a report in the Wall Street Journal.

The US has been blockading Iran’s ports in a bid to squeeze its economy and prevent oil exports.

Following the reports, the price of a barrel of Brent Crude oil shot up to $126 overnight, its highest level since March 2022, shortly after Russia invaded Ukraine which sent energy prices soaring. Since last night, the price of a barrel of Crude Oil has fallen to $116.

Susannah Streeter, chief investment strategist at investment platform Wealth Club, said the surge in oil prices was unlikely to have an effect on any interest rate announcements from the Bank of England today.

She said: “For now, a wait-and-see stance is expected to be adopted, with the Bank of England looking set to keep rates on hold, and the European Central Bank poised to take the same action.

“But inflation is already ramping higher, as higher forecourt prices show up in the data. But they will want to see signs that inflation is becoming embedded in the economy, through higher consumer prices, and sticky wage growth before they make a move on rates.”

Interest rate announcement just minutes away

The Monetary Policy Committee’s announcement on interest rates is just minutes away. Stick with us and we’ll bring you the decision as it’s confirmed.

BREAKING: BANK OF ENGLAND HOLDS INTEREST RATES AT 3.75%

Decision from the Bank of England expected

The announcement from the Bank of England’s Monetary Policy Committee confirms what experts and economists had been predicting – that interest rates would be held.

The committee will next meet in June when the ripple effects of the conflict in the Middle East will be more apparent.

If inflation continues to rise, it could force the committee to increase interest rates.

Monetary Policy Committee votes to hold rates by 8-1

The MPC voted to hold rates at 3.75% by a majority of 8-1.

The committee’s chief economist and executive director, Huw Pill, was the one person who voted to raise rates, to 4%.

All other members, including the governor Andrew Bailey, voted to hold rates at 3.75%.

'Brace for bumps ahead'

What does the Monetary Policy Committee’s report say?

The report published by the Bank of England alongside its latest interest rate decision reveals a cautious stance from the Monetary Policy Committee.

It states that the conflict in the Middle East means that “prospects for global energy prices are highly uncertain”.

It adds: “Monetary policy cannot influence energy prices but will be set to ensure that the economic adjustment to them occurs in a way that achieves the 2% inflation target sustainably. The policy stance required to achieve this will depend on the scale and duration of the shock, and how it propagates through the economy.”

What does the interest rate decision mean for your mortgage and savings account?

The decision to hold interest rates means nothing major is likely to happen to your savings account rate in the immediate term.

The same goes for standard variable rate and tracker mortgages, which mirror the base rate.

Those on fixed-rate mortgages are less affected by immediate changes in the base rate as the interest rate you agree on your mortgage stays the same for the duration of its term.

Why Huw Pill voted to raise interest rates

As we’ve reported below, just one member of the Monetary Policy Committee voted to raise interest rates today – Huw Pill, chief economist and executive director.

Pill voted to raise interest rates by 0.25 percentage points to 4%.

His justification for a hike was that the effects of higher energy prices had the potential to create second-round effects which could “raise UK inflation beyond the near term in a persistent manner”.

Second-round inflationary effects occur when workers start asking for pay rises so their incomes keep up with inflation and firms raise prices to protect profits.

Worse-case scenario could see inflation could hit 6.2% in 2027

The Monetary Policy Committee’s report, published alongside its interest rate decision, says inflation could hit a peak of 6.2% at the start of 2027.

It describes three scenarios which could occur due to rising prices caused by the conflict in the Middle East. The worst of these, Scenario C, suggests inflation could reach as high as 6.2% in Q1 2027.

This, the report says, could lead to interest rates rising as high as 5.25% by the start of next year.

However, it’s worth noting this is a worse-case scenario, based on energy prices rising sharply and remaining elevated for a “prolonged period”.

In Scenario A, inflation would rise to 3.6% at the end of 2026, while under Scenario B, it would hit 3.7% by the end of this year.

Interest rates ‘another headache for the chancellor’

Despite a hold in the base rate today, markets are largely expecting an increase at some point in 2026.

This, combined with domestic political instability and a weak economic outlook, has prompted investors to sell UK government bonds, pushing yields up. This week, the 10-year gilt yield rose above 5% for the first time since 2008.

Lucy Smith, senior investment manager at wealth manager Killik & Co, said: “A high base rate, political instability in No.10 and a weak economic outlook will all contribute to driving gilt yields up. In real terms, this means the government will have to pay a premium on new debt, weakening its fiscal outlook.”

When will the next interest rate decision be announced?

The Bank of England’s Monetary Policy Committee will next meet in around six weeks’ time, with an announcement on interest rates scheduled for 18 June.

The next decision after this will be announced on 30 July.

Thanks for following

We’re going to end our coverage for today. Thanks for following and make sure you check out Moneyweek.com for all the latest personal finance and investment news.

Summary

• UK inflation rose by 3.3% in the 12 months to March 2026, up from 3% in the year to February.
• Prior to the conflict in the Middle East, experts had predicted inflation to fall from 3% in February.
• Some forecasters expect CPI inflation could rise above 4% by the autumn.

| What is inflation? | UK inflation forecast | Inflation basket of goods | CPI release dates |

Good afternoon and welcome to MoneyWeek’s live coverage of the latest UK inflation data release.

Tomorrow morning, we’ll find out just how heavily the oil squeeze that followed the outbreak of the Iran conflict pushed up UK prices.

Follow us here today for rolling preview and analysis.

When is the March UK inflation data released?

The Office for National Statistics (ONS) will release the latest UK inflation figures – covering the month of March – tomorrow morning (22 April) at 7am.

Inflation statistics are always retrospective; they cover the month before the one in which they are released.

Last month, the inflation release for February showed that CPI inflation held steady at 3% over the preceding year. Significantly, this covered the period up until the outbreak of the conflict in Iran.

It is almost a given that inflation will have risen during March as a result of the war. The most important question is how significant the increase will prove to have been.

What is CPI inflation?

Inflation measures the pace at which prices increase. It is calculated by assessing changes in a core, representative basket of goods and services that economists deem representative of the UK economy as a whole.

The core measure of inflation – and the one we’ll be referring to here unless specified – is the annual change in the Consumer Prices Index (CPI). There are other measures of inflation which we’ll refer to, but CPI is the metric that is most closely followed, largely because it is the easiest metric with which to make international comparisons.

The Bank of England – like most central banks – targets a 2% annual CPI inflation rate. This is generally viewed as healthy by economists, representing an economy that is growing but without prices increasing too fast for household spending power to keep up.

What do analysts expect happened to UK inflation in March?

March is a key month in the recent history of UK inflation.

Up until February, inflation had been on a downward trend. There were some bumps in the road, but the expectations from most commentators and the Bank of England’s own forecasters was that inflation was trending down towards the 2% target – perhaps as soon as the second quarter of 2026.

The Iran conflict has drastically changed the picture. With the Strait of Hormuz effectively closed since the beginning of March, oil prices have risen, putting pressure on the input costs for almost every kind of business.

“March's CPI figures are expected to show inflation edging up, reflecting the impact of geopolitical tensions on oil and commodity prices, which feed through into energy, fuel and food costs for households,” said Harriet Guevara, chief savings officer at Nottingham Building Society.

Analysts at Bank of America and Deutsche Bank predict a 3.3% rate of annual CPI inflation.

Why does inflation matter to you?

Inflation impacts your money in two different ways – one of them direct, the other less so.

The direct impact is the amount that you pay for things. As far as the March data goes, you’ve already felt this impact; if you noticed goods (especially petrol) being a little more expensive over recent weeks, or your budget didn’t stretch as far as normal, that’s because of inflation.

But it has a less direct, and longer-lasting impact. Higher inflation is a warning sign for central bankers, and the only lever they can pull to bring it down is to increase interest rates.

Higher interest rates mean that mortgage rates increase, as do interest rates on any kind of debt you hold. On the other hand, it could see the interest that you earn on your cash savings increase.

How high could UK inflation go this year?

The oil shock following the Iran war will almost certainly have pushed the UK’s rate of CPI inflation up in the year to March. The bigger question in many respects is how high the metric could reach later this year.

Former Bank of England rate-setter Michael Saunders, now senior economic adviser at advisory firm Oxford Economics, thinks CPI inflation could reach as high as 4.5% by the end of the year – and that even if the oil crisis resolves, the impact could be long-lasting.

“Because of uncertainties regarding the extent to which higher inflation will affect inflation expectations and pay growth, the scale of any second-round effects is unlikely to be clear until early next year,” said Saunders.

See our UK inflation forecast explainer for more detail on where inflation is expected to go next.

Thanks for following our preview coverage of tomorrow's UK interest rates decision this afternoon. We're pausing live coverage for now, but join us from 7am tomorrow as we bring you live coverage of the inflation figures from their release.

Good morning and welcome back to our live coverage of the inflation data for March 2026. The Office for National Statistics (ONS) will release the figures very shortly.

UK inflation rises by 3.3%

The Consumer Prices Index (CPI) rose by 3.3% in the 12 months to March 2026 – up from 3% in the year to February. This data covers the first month since the conflict in the Middle East began on 28 February.

What drove the UK inflation rate rise?

On a monthly basis, CPI rose by 0.7% in March 2026 – up from 0.3% the year before.

The Consumer Prices Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.4% in the 12 months to March 2026, up from 3.2% in the 12 months to February. On a monthly basis, CPIH rose by 0.6% in March 2026, compared with a rise of 0.3% in March 2025.

Motor fuels was the main driver of the monthly change in the annual CPIH and CPI rates, the ONS said. Falling prices in clothing partially offset the rise.

Rachel Reeves: “Our economic plan is the right one”

Chancellor Rachel Reeves has responded to the latest inflation data, insisting the government’s economic plan has put them in a stronger position to help families as the impact of the war in Iran affects the UK economy.

“This is not our war, but it is pushing up bills for families and businesses. That’s why it’s my number one priority to keep costs down,” she said.

"Our economic plan is the right one and has put us in a stronger position to support families in the face of this new crisis.

“We’ve taken £117 off energy bills, frozen rail fares and protected motorists with the fuel duty freeze. We’re acting to protect people from unfair price rises if they occur to bring down food prices at the till, and are boosting long-term energy security — building a stronger, more secure economy.”

Transport drives UK inflation in March 2026

Transport, principally motor fuels, made the largest contribution to the increase in CPI annual inflation in March.

Housing and household services prices also accelerated as did food and non-alcoholic beverages, and recreation and culture prices.

The increase in the inflation rate was partially offset by a fall in clothing and footwear prices.

How have petrol prices changed?

Fuel prices have shot up in recent weeks, after the US and Israel launched strikes on Iran on 28 February. Wholesale oil prices increased after Iran shut the Strait of Hormuz, a narrow waterway between Iran and Oman through which 20% of the world's oil is transported. As petrol and diesel are made by enriching crude oil, drivers saw prices at the pump surge.

The average price of a litre of petrol has now fallen back slightly to 157p, according to RAC fuel watch on 21 April, but it’s still 24.7p per litre more than before the Iran war began. On 14 April, it had risen to 25.5p more than before the conflict. The average price of a litre of diesel was 190p a litre on 21 April – 47.8p higher than before the conflict, but slightly less than the 49.2p difference on 14 April.

The price of a litre of petrol is now 24p more expensive than a year ago, according to analysis by roadside assistance provider, The AA. It means drivers are now paying £13.20 more to fill a typical 55-litre petrol tank compared to this time last year.

Signs of living costs rising

While drivers may have noticed the price of fuel rising when they visited the pumps since the war began, today’s inflation data shows how prices of goods and services have changed in March.

“These are the first flickers of the Middle East conflict heating up everyday costs, with volatile oil and gas market pricing hitting forecourts,” Susannah Streeter, chief investment strategist, Wealth Club said.

“There’s likely to be further flare-ups on the way, especially if a longer-term resolution isn’t agreed.”

The renewed climb in fuel prices puts households at risk of squeezed budgets, Streeter said.

“Shoppers have turned cautious, and it seems retailers have had to discount to shift stock, with prices for clothing and footwear declining sharply month on month. They dipped by 0.8% in the 12 months to March 2026 compared with a rise of 0.9% in the 12 months to February.

“It was the lowest recorded annual rate for March since 2021 when prices were hit by the COVID-19 pandemic. Clearly consumers are tightening their belts as another cost-of-living crisis arrives.”

How do you feel about the cost of living?

Inflation affects people in different ways – as people have different spending habits, your personal inflation rate can differ to the national inflation rate.

For instance, motorists who need to regularly fill up their car with fuel will notice their transport spending increasing more than people who tend to walk everywhere.

How are you feeling about the rising cost of living?

What does the UK inflation rate rise mean for savers?

The average savings rate is currently 3.46%, according to money comparison website Moneyfactscompare.co.uk. This is higher than the latest inflation rate of 3.3%, meaning savers can get real returns on their cash – but it’s important to shop around.

The best easy access savings account on the market right now pays 4.50%. This is the Chase Saver with boosted rate – it includes a 2.25% AER bonus rate that's fixed for 12 months. The underlying variable rate is 2.25%.

There are currently 1,582 inflation-beating savings accounts, including 139 easy access, 131 notice accounts, 138 variable rate ISAs, 387 fixed rate ISAs and 787 fixed rate bonds.

Caitlyn Eastell, personal finance analyst at Moneyfactscompare.co.uk, said: “During times of uncertainty, some savers may place higher value on flexibility. Easy access accounts can be useful to help manage monthly volatility, giving savers the freedom to respond to unexpected costs."

Savers face a "tricky balancing act" when choosing between a fixed or variable rate account, Eastell said. "While they may be able to enjoy more competitive returns in the short-term, inflation will quickly catch up, eroding their hard-earned cash. In any case it’s crucial savers shop around for deals that pay over 3.3% to ensure they aren’t left out of pocket.”

Is the UK heading for stagflation?

The latest UK inflation figures are a worry for policymakers given that they arrive alongside a weakening economic picture.

The International Monetary Fund (IMF) downgraded its forecast for UK economic growth last week, saying that the country would be hit harder by the fallout of the Middle East conflict than any of the other members of the G7 (a group of seven rich nations of which the UK is a member).

This combination of inflation and economic stagnation is often referred to as ‘stagflation’, and poses a major headache for rate-setters. Usually, the Bank of England would hike rates to combat higher inflation – but that risks exacerbating the weakening economic situation.

On the plus side, economic weakness could in itself prevent inflation getting too out of hand.

“Though rising services inflation will worry rate-setters as it suggests that the fallout from the Iran war is already intensifying underlying price pressures, the squeeze from a weakening economy should limit any second-round effects,” said Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales.

However, Thiru added that despite the extended ceasefire that has been announced, energy costs and food prices are likely to continue to rise and could lift UK inflation above 4% by the autumn.

Higher UK inflation could push mortgage rates higher

Despite the weakening economic situation in the UK, the Bank of England may veer towards hiking interest rates anyway if it deems the risks from runaway inflation to be too great.

“That would likely mean higher mortgage rates, adding to the cost pressures facing those looking for a home loan and putting further strain on borrowers coming to the end of cheaper fixed-rate mortgages,” said Charlotte Kennedy, Chartered Financial Planner at wealth manager Rathbones.

According to data from Moneyfacts, the UK’s average mortgage rate has risen from 5.50% to 5.71% since the previous inflation announcement.

“Homebuyers will need to evaluate their affordability because rates could stay higher for longer as the Bank of England tries to bring inflation back towards its target,” said Caitlyn Eastell, personal finance analyst at Moneyfacts.

How could higher UK inflation impact your investments?

While higher UK inflation is likely to lead to increased mortgage and savings rates, it is less straightforward to say how it could impact your investments – largely because different investments will respond differently to higher inflation.

Gilt yields are likely to rise, assuming that the Bank of England delays or reverses its cutting cycle in response to higher inflation, and this would likely feed through into higher bond yields.

But equities are a mixed bag. “UK equities, particularly consumer-facing sectors, face margin pressure from rising input costs,” said Lale Akoner, global market analyst at trading platform eToro.

“Conversely, energy and commodity-linked stocks should benefit from sustained oil strength,” Akoner added.

How will the Bank of England respond to higher inflation?

The Bank of England’s Monetary Policy Committee (MPC) faces a difficult decision when it next sets UK interest rates.

Given the twin challenges of a weakening economy (which would normally imply rate cuts) and rising inflation (which would normally imply rate hikes), it is far from clear what the MPC will decide.

“After the shocks of Covid and the Ukraine war, central bankers remain hypersensitive to anything that risks embedding another round of inflation,” said Rob Morgan, chief investment analyst at investment manager Charles Stanley Direct.

The next MPC meeting takes place next week, and its decision will be announced on 30 April.

“The BoE is expected to put interest rates cuts on the backburner once more,” said Morgan. “The MPC needs time to assess the impact and will no doubt resist jumping to any conclusions about how long the conflict lasts and the extent of any pass through to core inflation.”

Services inflation remains sticky

Most experts had expected an increase in goods inflation, which is a logical consequence of the Iran war pushing up oil prices.

Alarmingly, though, this was accompanied by a rise in services inflation from 4.3% in the 12 months to February to 4.5% in the 12 months to March.

Services inflation has been running persistently ahead of goods inflation since July 2023. This sticky services inflation has been a major upward driver of overall UK inflation throughout that time.

This was largely due to increased air fares, and according to Deutsche Bank’s chief UK economist Sanjay Raja the bank’s core services measures, which factor out some more volatile inputs, “remained broadly unchanged”.

Still, persistent services inflation compounds the headache faced by MPC rate-setters next week.

UK inflation: other metrics

So far today we’ve mostly discussed the headline consumer prices index CPI figure, which rose 3.3% in the year to March.

Some of the other key metrics from today’s release are:

• Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 3.4% in the 12 months to March 2026, up from 3.2% in the 12 months to February;
• Core CPIH (CPIH excluding energy, food, alcohol and tobacco) rose by 3.3% in the 12 months to March 2026, down from 3.4% in the 12 months to February;
• Core CPI (CPI excluding energy, food, alcohol and tobacco) rose by 3.1% in the 12 months to March 2026, down from 3.2% in the 12 months to February;
• On a monthly basis, CPI rose by 0.7% in March 2026, compared with a rise of 0.3% in March 2025;
• CPIH rose by 0.6% in the month to March 2026 (up from 0.3% in the month to March 2025), while core CPIH rose by 0.3% over the same period (down from 0.4% a year before).

Recap: UK inflation rose to 3.3% in year to March

Here’s a recap of this morning’s UK inflation headlines:

• CPI inflation rose to 3.3% in the 12 months to March;
• This was largely driven by increases in transportation costs, especially motor fuels – largely thanks to the impact of the war in the Middle East;
• Services inflation has remained sticky, rising from 4.3% in the 12 months to February to 4.5% in the 12 months to March;
• Higher inflation could prompt the Bank of England to slow its pace of rate cuts, or even raise interest rates – potentially leading to higher mortgage rates.

Thank you for following our coverage of today’s UK inflation data release. As expected, the Iran war has pushed up prices across the UK – how will policymakers react? We’ll find out at the next MPC meeting, which is taking place next week.

We’re ending today’s live coverage here, but keep an eye on the MoneyWeek website and subscribe for email updates as we bring you more inflation news and reaction following today’s release.

UK inflation: Summary

• The Office for National Statistics (ONS) has released the latest UK Consumer Price Index (CPI) measure of inflation data.
• It has remained at 3%, unchanged from January.
• Economists expected the February inflation data to remain at 3%.
• The data has been released as fears grow that inflation will surge in the coming months due to the conflict in Iran.
• The Bank of England (BoE) held interest rates at 3.75% at its last meeting in response to the growing threat of rising prices.
• UK inflation forecast | Interest rate predictions | Next Bank of England base rate meeting | New ONS basket of goods

Good afternoon and welcome to our live coverage ahead of the latest UK inflation data being published by the Office for National Statistics (ONS) tomorrow (25 March).

The latest Consumer Price Index (CPI) measure of inflation data will be released at 7am, covering the 12 months to February 2026.

In the 12 months to January, CPI inflation read 3%, down from 3.4% in December, marking the slowest annual rate of CPI inflation since March 2025.

Inflation for February is expected to come in around the 3% mark, according to economists.

Follow our live report here as we bring you rolling preview analysis ahead of the data being published, plus live reaction after it is released.

Economists expect inflation to have risen at same pace as January

Economists at research and consulting firm Pantheon Macroeconomics expect the February data to show inflation rising at 3% in the year to February, unchanged from January.

The firm is forecasting higher core goods inflation will offset lower motor fuel costs, with core CPI inflation set to remain unchanged year-on-year at 3.1%.

Meanwhile, it is forecasting services inflation to come in at 4.1%, down from 4.4% in January.

UK inflation since 2020

The CPI measure of inflation has broadly trended downwards since peaking at 11.1% in October 2022 following a surge in wholesale energy prices.

Global prices for gas, electricity and oil started to increase in the summer of 2021 when economies around the world opened up following coronavirus lockdowns. This increase was exacerbated by Russia’s invasion of Ukraine.

In September 2024, the CPI measure of inflation slowed to 1.7% before increasing to 3.8% in July 2025, but since then has slowed to 3% in January 2026.

Why does the ONS release inflation figures at 7am?

The ONS previously released key macroeconomic data at 9.30am and briefed some news agencies on the details beforehand.

However, it trialled a 7am release time during the coronavirus pandemic, a move it made permanent in March 2022.

The statistics body said it had decided to change the time indefinitely as it “increases the visibility and timely explanation of our statistics via the media” and made it more widely accessible to the public.

'The bigger concern is what happens next'

While the headline CPI inflation figure published by the ONS tomorrow is expected to remain roughly stable, a shock could be on the way due to the conflict in the Middle East.

The price of Brent crude oil has surged since the US and Israel first launched strikes on Iran on 28 February, disrupting shipping and leaving energy infrastructure damaged. A barrel of crude oil has gone from $72 on 28 February to $95 on 23 March.

Rising oil prices push up the price of petrol, transport costs and then consequently the cost of the weekly food shop.

Tamsin Powell, consumer finance expert at personal loan lender Creditspring, said: “The bigger concern is what happens next, as rising fuel and wholesale energy costs are already pointing to renewed pressure in the months ahead.

“Even if February’s CPI figure looks calm on paper, it may not reflect the pressures already building in everyday spending,” Powell added.

What do you think inflation will be in February?

Why rising inflation doesn’t always mean prices are going up for you

The ONS’ official measure for tracking inflation is the CPI, but even if it’s rising that doesn’t mean your cost of living has gone up.

The CPI measure tracks price rises across a virtual basket of roughly 750 goods and services, which changes once per year to keep up with market trends.

But that means the headline figure change might not reflect how much more you’re spending on a day-to-day basis.

For example, a teenager might be more impacted by price rises in video games than a pensioner.

We're going to end our coverage here for today, but keep an eye on this page where we'll bring you live reaction and analysis when the ONS releases its latest inflation data tomorrow.

Good morning and welcome back to our live coverage. The ONS is just about to release its latest inflation data, so stay with us for rolling reaction and analysis.

BREAKING - UK INFLATION REMAINED AT 3% IN FEBRUARY

Data from ONS today unsurprising

The data released by the ONS this morning is what was expected from economists.

The annual rate of CPI inflation has stayed the same as January, but it doesn’t reveal much about where prices, which are likely to be impacted by the war in the Middle East, might go in the future.

Rising clothing prices offset by slowing petrol costs

The ONS said rising clothing and footwear prices saw the headline CPI figure rise in the 12 months to February, but falling petrol prices offset the increase.

Prices also rose across furniture and household goods, but slowed across food and non-alcoholic drinks.

Grant Fitzner, chief economist at the ONS, said prices for petrol costs were collected before the conflict in the Middle East broke out, meaning they are likely to rise over the coming months.

Core CPI rises while services inflation falls

Core CPI, which strips out prices for more volatile items like food and energy, rose by 3.2% in the 12 months to February, up from 3.1% in January.

Meanwhile, the CPI services annual rate eased from 4.4% to 4.3%.

The Consumer Price Index including owner occupiers’ housing costs (CPIH), which includes council tax costs and is considered the most comprehensive measure of inflation, rose by 3.2% in February, unchanged from the 12 months to January.

February inflation figures a ‘false flag’ for the economy

While the February inflation figures released today might seem positive, they’re still over the Bank of England’s 2% target, which is set by the government.

Meanwhile, they measure price rises which happened before the conflict in the Middle East, which economists expect will have a significant inflationary impact over the coming months.

Sirun Thiru, chief economist at the Institute of Chartered Accountants in England and Wales (ICAEW), branded the February inflation figures a “false flag”.

Thiru added: “While inflation should fall next month (March) as the cut to green levies temporarily lowers energy bills, a brutal inflation surge looms with skyrocketing oil and gas costs likely to lift the headline rate above 4% by the summer.”

What does the latest data mean for interest rates?

Today's inflation data is unlikely to have much impact on interest rates in the near or long term.

The Bank of England’s Monetary Policy Committee (MPC) had been intending to lower interest rates in 2026 with inflation slowing, unemployment rising and the economy stagnating.

At the start of the year, the central bank was expected to lower rates twice in 2026, with the first coming in March.

But the conflict in the Middle East and its potential inflationary impact has, at least for now, given the MPC more pause for concern.

At its last meeting, ratesetters voted unanimously to hold interest rates at 3.75% rather than lowering them.

Andrew Bailey, the governor of the Bank of England, said holding interest rates was the “appropriate” thing to do with the threat of higher inflation looming and the knock-on effect this could have on consumers.

In the longer term, interest rates could remain at their current rates until well into 2027, according to advisory firm Oxford Economics, which has voiced concerns over elevated global oil and gas prices.

Inflation figures include supermarket scanner data for first time

This month’s set of inflation data is the first which includes prices tracked through supermarket scanners.

The ONS typically tracks prices by manually checking them in stores and shops, but now around 50% of the grocery market data is being tracked through scanners and online tills.

The ONS says the move will allow it to more accurately measure year-on-year price changes and find out how much of a particular item shoppers are buying.

A closer look at the figures

How inflation affects you depends on what goods and services you buy, so it helps to look at the data in a more granular way.

Here’s a breakdown of exactly how much prices rose across some of the main categories in the year to February.

A quick recap

If you’re just joining us, here’s a quick recap of what you’ve missed.

The CPI measure of inflation remained at 3% in the year to February, the ONS confirmed this morning, in line with economists’ expectations.

The CPIH measure of inflation also stayed the same as the month before, remaining at 3.2% in the year to February.

But experts are warning the data pre-dates the war in the Middle East, which is expected to put major upward pressure on inflation.

Savers should be ‘hunting down’ the best rates

Higher inflation can keep savings rates elevated, but it’s crucial your money is an account that’s paying out a rate above inflation.

The average savings rate on the market is currently paying 3.37% in interest, according to data website Moneyfactscompare, but if inflation rose to 4%, you would be losing money in real terms.

Caitlyn Eastell, personal finance analyst at Moneyfactscompare, said: “Settling for average won’t cut it, savers should be hunting down the most competitive rates. The top easy access account currently pays 4.71%, which puts savers ahead.”

Economists at Pantheon Macroeconomics believe inflation will peak at 3.6% in November 2026, but what do you think?

How does the UK’s rate of CPI inflation compare to other countries?

CPI data is the measure used to compare the UK's rate of inflation against other major countries.

According to the ONS, the UK’s rate of inflation was higher than the EU (2.1%), Germany (2%) and France (1.1%) in February.

The last time the UK rate was lower than the EU’s was December 2024.

When will March's inflation data be published?

The ONS publishes inflation data once per month.

It will be releasing the data for the month of March on 22 April.

That concludes our inflation coverage for today. Thank you for joining us. We will be back with more live analysis in the weeks to come.

Summary

• Chancellor Rachel Reeves delivered her second Spring Statement today (3 March) in the House of Commons
• The annual fiscal event was a largely tame affair, with no major policy announcements made
• The Office for Budget Responsibility (OBR) also published its latest economic forecast alongside Reeves’s statement
• It comes after the government recorded a record-breaking budget surplus of £30.4 billion in January following an uptick in tax receipts

Good afternoon and welcome to MoneyWeek’s Spring Statement live report. Chancellor Rachel Reeves is set to deliver the statement to the House of Commons tomorrow (3 March). We will be covering all the major announcements as they happen, as well as bringing you reaction and analysis.

Will anything major be announced during the Spring Statement?

Rachel Reeves isn’t expected to make any major policy announcements as her preference is to do this just once a year at the Budget.

However, the chancellor did confirm some big changes to the benefits system in the 2025 Spring Statement, although some of these were reversed later in the year.

When is the Spring Statement?

The chancellor will deliver the Spring Statement in the House of Commons at around 12:30pm tomorrow (3 March).

The 2025 Spring Statement lasted around 30 minutes, and this year’s statement is expected to take around the same amount of time.

The Office for Budget Responsibility (OBR), the UK’s fiscal watchdog, will also publish updated economic forecasts alongside the Spring Statement. We expect these to be released at around 2:30pm.

What is the Spring Statement?

The Office for Budget Responsibility (OBR) is required to make two sets of economic forecasts each year which outline their projections for the economy, based on the government’s fiscal policy.

The most significant of these is published alongside the Autumn Budget, the most important fiscal event of the year where most governments outline their economic policy.

The other forecast is usually published in the spring. The chancellor usually makes a statement to the House of Commons addressing these projections, hence the name “Spring Statement”.

The Spring Statement is not necessarily an event where new fiscal policy is announced, but previous chancellors have used the statement to outline new economic plans to meet OBR forecasts.

For example Rachel Reeves used the Spring Statement to announce cuts to welfare in her 2025 statement.

Could ‘boring’ Spring Statement be what’s needed for the pension sector?

Plenty of changes are on the way for the pension sector, such as pensions being included in the scope of inheritance tax from April 2027 and a reduction in salary sacrifice National Insurance savings from 2029.

This comes as the seismic Pension Schemes Bill makes its way through the House of Lords.

With all this considered, pension savers will be hoping for a “boring sequence of fiscal events” this year, including the Spring Statement, said Jamie Jenkins, director of policy at retirement firm Royal London.

“Given the recent history of fiscal events, one can easily get excited at the prospect of boredom,” Jenkins said.

That ends our coverage for today, but make sure you join us again tomorrow when we'll bring you live coverage of the Spring Statement, plus more analysis and expert commentary.

Hello, good morning and welcome back to our live coverage of the Spring Statement, which is taking place at around 12.30pm today. Stay with us as we bring you analysis and commentary on what any announcements mean for you.

Reeves expected to focus on stability amid ‘uncertain’ world

The chancellor’s address to the House of Commons today comes amid major tensions in the Middle East after a joint attack on Iran by Israel and the US.

In response, Iran has launched retaliatory strikes with missiles hitting Israel as well as a host of gulf countries including Kuwait, the United Arab Emirates (UAE) and Bahrain.

In the midst of the conflict, which has caused oil prices to surge, the chancellor is expected to drive home the message that the government’s focus on stability will contribute to a “stronger and more secure economy”.

The chancellor is expected to say: “This government has the right economic plan for our country…in a world that has become yet more uncertain.

“Stability in the public finances, investment in infrastructure and reform to our economy.

“Building growth not on the contribution of a few people or a few parts of the country, but in every part of Britain with a state that doesn’t stand back, but steps up."

What could the impact of the Iran conflict be on the Spring Statement?

It is not clear whether Reeves will directly address the conflict in Iran during her statement today, which could prove inflationary.

That said, many experts are saying the tensions are in too early a stage to know exactly what the future effects will be.

What the conflict could mean for the Spring Statement is that the economic forecasts put forward by the Office for Budget Responsibility (OBR) don't account for the Iran conflict, meaning they are making predictions based on a different world today.

The OBR usually publishes its final forecasts five days before the Spring Statement or Budget, after which the Treasury can fine tune any measures which might affect the economy.

Mortgage lenders cut rates ahead of Spring Statement – should you overpay?

A host of major lenders including Barclays, Nationwide and NatWest have cut mortgage rates ahead of the Spring Statement.

Jinesh Vohra, chief executive officer of mortgage app Sprive, said now could be the time for those on variable rate and cheaper fixed-rate deals to use the extra money to overpay on their mortgage and reduce the amount they’re paying in interest.

Do note, this is based on predictions the Bank of England (BoE) base rate will drop which would feed into mortgage costs, but whether rates will come down in the future is now less certain following the conflict in Iran.

If the conflict causes inflation to rise across the globe, it could make central banks more cautious, including the BoE, and less likely to lower rates.

How is the UK economy doing?

The Spring Statement is an update on the state of the UK economy and public finances, but how are both of these actually faring?

How you judge this depends on what macroeconomic measure you’re looking at, be that inflation, Gross Domestic Product (GDP), unemployment or something else.

The Consumer Price Index (CPI) measure of inflation has slowed from record highs in 2022 and currently sits at 3%, according to the latest data from the Office for National Statistics (ONS). But it is still above the government’s 2% target which the Bank of England (BoE) has to meet.

Meanwhile, the latest figures show GDP grew by just 0.1% in the final three months of 2025, and 1.3% across the whole of 2025, although this was better than the 1.1% GDP growth recorded in 2024.

Unemployment hit a five-year high in January while unemployment among 16 to 24-year-olds rose to 16.1% in the final quarter of 2025, the highest level in a decade.

However, wages continue to grow, with annual growth in weekly earnings between October and December 2025, excluding bonuses, rising by 4.2% and above inflation.

The government also recorded a £30.4 billion budget surplus in January, aided by an increase in tax receipts. The ONS said this was £15.9 billion more than in January 2025 and the highest surplus (when not adjusted for inflation) since monthly records began in 1993.

Spring Statement coming up shortly

We're expecting to hear from the chancellor in around five minutes.

The chancellor has just begun delivering her Spring Statement. We will be reporting on the statement here, as it happens.

Reeves: OBR forecasts show 'our plan is the right one'

The chancellor says the Office for Budget Responsibility’s (OBR) new forecast shows that Labour’s plan for the economy is “the right one.”

She says her fiscal policy has led to inflation and borrowing falling while living standards and economic growth are up.

Reeves reiterated that her ambition is for just one large fiscal event a year, limiting major policy changes to the Autumn Budget.

OBR updates forecasts for UK economic growth

Reeves says the OBR has updated its growth forecasts for the UK economy, stating it will be slower in 2026 than previously predicted then faster than previously predicted in 2027.

It is forecasting GDP to grow by 1.1% in 2026, 1.6% in both 2027 and 2028 and 1.5% in 2029 and 2030. In total GDP will grow by 5.6% over the course of this parliament, Reeves says.

Reeves: Brits to be £1,000 better off a year in real terms by next election

The chancellor says the OBR now anticipates that by the next election, due in 2029, the average Brit will be around £1,000 better off a year. This number, she says, is adjusted for inflation.

She adds: “The economy is growing, living standards are rising, and inflation has fallen. But I'm not satisfied yet with these forecasts."

Unemployment to peak in 2026, but fall thereafter

Unemployment has been a major bugbear for the chancellor in recent months, with UK joblessness rising to a five year high.

However, the chancellor says the OBR’s forecast shows unemployment is set to fall soon.

Reeves says the OBR expects unemployment to peak later this year, but is then set to fall in every year of the forecast period.

Joblessness will then end the forecast period at 4.1%. She adds that this would be lower than it was at the start of this parliament in 2025.

Reeves: Public sector net borrowing to fall to 1.8% by 2030

The OBR’s forecasts say the government is set to reduce public sector net borrowing from 4.3% this year to 3.6% in 2027, then to 2.9% in 2028, 2.5% in 2029 and 1.8% in 2030, Reeves says.

She adds that this year the government is set to borrow less than the G7 average, something she says the former Conservative government “never achieved”.

OBR: Inflation to fall faster than November projection

The chancellor says the OBR’s new forecasts will show that inflation will fall faster in 2026 than it had previously expected.

She takes credit for this, saying her reforms in the Budget are helping disinflation in the UK.

In particular, analysts say the policy of removing green levies from household energy bills is the largest contributor to disinflation. The government says it will save the average household £150 a year from April.

Shadow chancellor: “Is that it?”

Rachel Reeves has finished delivering the Spring Statement.

Conservative shadow chancellor, Mel Stride, opened his response with a sentiment many listeners will have been thinking: “Is that it?”

He lambasted Reeves for having “no clear economic plan”, saying as the economy “bleeds out”, the chancellor comes to the House of Commons with “nothing to say and with no plan”.

Stride further criticised the chancellor for raising taxes and “destroying growth” with her fiscal policy.

OBR publishes economic and fiscal outlook

The OBR has published its economic and fiscal outlook for the UK economy following the chancellor's speech. We'll bring you the main takeaways from the document.

Spring Statement ‘provides little relief to people across the UK’

While Reeves insists the Labour government’s plan “is the right one”, is it enough to convince members of the public? Kevin Mountford, personal finance expert and co-founder at Raisin UK, said: “This provides little relief to people across the UK.

“The economy remains fragile, inflation is still above the Bank of England’s target, people are continuing to contend with cost of living pressures, and we’ve also seen the highest unemployment rate since 2021.”

Some 60% of people dipped into their savings to cover their outgoings last year, including 20% who did so to pay day-to-day bills, according to Raisin’s Great British Savings Report.

“While many lack the buffer to absorb these pressures, approaching the end of the tax year is a critical time to review finances, use available allowances, and make sure savings are earning competitive returns,” Mountford said. “Small steps can make a big difference.”

We look at how much you should have in emergency savings in a separate piece.

OBR: Chancellor’s fiscal headroom now higher than in Budget

Rachel Reeves’s fiscal headroom, the financial buffer the Treasury has against unexpected shocks, is forecast to be higher now than the OBR expected at the Autumn Budget.

Following the Spring Statement, the OBR now expects fiscal headroom to be £23.6 billion by the end of the forecast period (2029/30).

This is £1.9 billion more than was expected in the OBR’s November forecast (£21.7 billion).

If this forecast is correct, headroom of £23.6 billion means Rachel Reeves will have the highest amount of headroom since November 2022.

OBR: ‘Key’ risks to the economy forecast due to Iran conflict

In its economic and fiscal outlook report, the OBR says “key” risks remain to its forecasts following the conflict in Iran.

Conflict in the Middle East could have “significant impacts on the global economy, particularly energy markets”, the document reads.

The report also says the OBR made its forecasts prior to tariffs imposed by US President Donald Trump last week, which has caused ripples in the markets since.

Unemployment expected to peak at 5.3% in 2026

The OBR’s forecast anticipates that UK unemployment will rise to just over 5.3% this year, a third of a percentage point more than expected in its November projection.

The fiscal watchdog says it expects weak labour market demand to continue in the near term.

After peaking in 2026, the OBR believes unemployment will fall gradually to an estimated equilibrium level of 4.1% by 2030.

Impact of inheritance tax reforms revealed

The Office for Budget Responsibility has forecast the impact of impending inheritance tax reforms that will see agricultural and business property relief curbed from April 2026 and pensions included in estate calculations from April 2027.

The OBR said changes to the inheritance tax regime announced since the October 2024 Budget, including taxing inherited pension pots and introducing changes to agricultural and business property reliefs, will account for around 14% of total inheritance tax receipts by the end of the forecast in 2030/31.

It said: "The behavioural responses to these measures and the tax base for inheritable pension wealth are particularly uncertain, adding further uncertainty to the forecast."

Capital Gains Tax to bring in £34.9 billion by end of parliament

The latest OBR forecasts show receipts from Capital Gains Tax (CGT) are expected to rise across the forecast period (until 2030).

The rise comes mainly due to projected rises in equity prices, and changes to the inheritance and capital gains tax regimes largely announced in the Budget in October 2024.

Expected CGT receipts in every year are higher now than they were in the OBR’s November forecast.

The OBR expected £29.8 billion to be raised from CGT in 2030/31 in November. They now expect £34.9 billion.

The November forecasts now show the OBR expects CGT to raise £21.8 billion in 2025/26, £20.8 billion in 2026/27, £25.5 billion in 2028/29, £32 in 2029/30, and £34.9 billion in 2030/31.

OBR: One million extra state pensioners to be paying income tax by 2031

The OBR’s economic and fiscal outlook report states an additional one million pensioners will be drawn into paying income tax by 2031 due to a frozen personal allowance and rising state pension, under the triple lock mechanism.

Reeves has previously said the government won’t tax pensioners whose only income comes from a state pension, but HM Treasury is yet to confirm how this exemption will apply.

OBR: House price growth set to remain steady

The OBR is forecasting house prices to grow by between 2.4% and 2.9% each year between 2026 and 2030, broadly in line with rises in average incomes.

Meanwhile, it predicts interest rates on mortgages to rise from 4.1% in 2026 to 4.5% on average each year from 2027 to 2030.

IFS: Be glad no new policy was announced at Statement

Helen Miller, director of the Institute for Fiscal Studies think tank, said today’s Spring Statement did exactly what it said on the tin, addressing the OBR’s updated economic forecasts and not much more.

She said: “There was blissfully little speculation about potential policy changes in the lead up, and no tweaking tax or spending policies on the day. To her credit, she stayed her hand. One major fiscal event per year is enough.

“The OBR’s forecast for borrowing improved ever so slightly, driven by strong tax receipts, which were more than enough to offset the cost of various policy announcements and reversals since the autumn."

Miller praised the chancellor for not making rash policy decisions in response to the conflict in the Middle East.

She said: “The all-important context is that ongoing events in the Middle East, and the sharp market movements they have induced, have already upended some of the assumptions underpinning this forecast. This is yet another reason to be glad that the Chancellor steered clear of making policy announcements in response."

UK’s economic woes demand bolder and swifter action, says Resolution Foundation

Following the Spring Statement, the Resolution Foundation, a left-leaning think tank, has said the chancellor must be bolder and enact swifter policy after it said the OBR’s forecasts are already out of date.

The think tank claimed the new conflict in the Middle East that emerged on 28 February after the US and Israel struck Iran has meant the OBR’s inflation and interest rates forecasts, which were finalised before the conflict started, are not up to date.

A new continued war between the US and Iran could lead to spikes in the price of energy and a renewed inflationary risk to the UK economy, exacerbating the cost of living crisis.

Analysis by the think tank says, if sustained, the sharp rise in oil and gas prices in the wake of the strikes could add over £500 to the typical household energy bill in the summer and roughly a percentage point to inflation.

As such, the Resolution Foundation said that while there is merit in having a low-key Spring Statement, policy action cannot wait until the Autumn Budget.

Ruth Curtice, chief executive of the Resolution Foundation, said: “The Chancellor may have succeeded in delivering a statement free from news today, but with growth weak, unemployment rising, and the risk of further energy price shocks, the UK’s economic woes demand bolder and swifter action.

Curtice highlighted the prospect of higher unemployment as being “particularly concerning” and urged the chancellor to tackle the problem head on and expand the ‘Jobs Guarantee’ to help get people back into work.

She added: “The best news from today’s Spring Forecast was an outlook for lower inflation and interest rates, but sadly both already look out of date before the ink is dry on the OBR forecast.

“The absence of policy decisions today can’t hide the fact that tough decisions lie ahead. Events in the Middle East have made support for families struggling with the cost of living more urgent. Looking further ahead, the Government still faces the prospect of going into the next election with major tax rises and a fresh squeeze on public services funding.”

UK employment prediction could be ‘too optimistic’

Dan Coatsworth, head of markets at investment platform AJ Bell, said events in the Middle East could mean forecasts on the UK’s rate of unemployment are too positive.

He said higher inflation caused by the conflict, meaning falling interest rates are less likely, could breed negative sentiment among consumers and businesses.

This could mean the OBR’s economic forecasts on growth could be too high.

“That situation might also mean Reeves’ prediction that UK employment is ‘set to peak later this year’ is also too optimistic,” Coatsworth added.

Labour’s economic plan is working, says Starmer

The prime minister showed his support for Rachel Reeves’s Spring Statement, writing on his Substack that we are “at a turning point in our economic plan.”

Starmer declared: “Inflation is down, energy bills and borrowing costs have fallen, productivity and business confidence is rising.

“This has all happened because of decisions, Labour decisions, that we have made. Always with the interests of working people in our minds-eye.”

The PM also reiterated much of what the chancellor said during the statement, saying Labour have “rejected austerity” and are doing all they can to drive down the cost of living.

“I know there is more to do. But our economic plan is working,” he added.

OBR: Welfare spending set to rise to £407 billion by 2031

The OBR’s economic and fiscal outlook report says welfare spending is forecast to rise this year by £18 billion (5.8%) to £333 billion.

It is then forecast to increase, not adjusted for inflation, by an average of £15 billion a year over the next five years, reaching £407 billion in 2031.

Do you think the Labour government's plan for the economy is working? Vote in our poll below.

And that's it, we're going to end our coverage here for today. But keep a close eye on MoneyWeek.com over the coming days as we bring you more analysis from today and what it means for you.

UK inflation fell in the year to January 2026, according to data released this morning (18 February) by the Office for National Statistics (ONS), following an uptick in December 2025.

The headline rate of Consumer Prices Index (CPI) inflation rose by 3.0% in the 12 months to January, down from 3.4% in the month-before period. This was slightly above predictions from Bank of England staff, which had forecast a CPI increase of 2.9%.

While it rose in December, the UK’s inflation rate is trending downwards over time. January’s 3.0% figure marks the slowest annual rate of CPI inflation since March 2025.

While it expects CPI to grow at around 3% during the first quarter of 2026, Bank of England forecasts currently predict that inflation will fall to 2.1% in April, largely thanks to disinflationary measures included in last year’s Autumn Budget.

The drop in UK inflation in January is expected to support an interest rates cut at the next meeting of the Bank of England’s Monetary Policy Committee (MPC).

“Granted services inflation was a tad stronger than expected, and this does play an important role in the Bank’s thinking,” said Luke Bartholomew, deputy chief economist at asset manager Aberdeen. “But with the labour market data yesterday pointing to ongoing weakness in employment and a further softening in pay growth, most policymakers are likely to look through any short run stickiness in the services data.”

On a monthly basis, CPI fell by 0.5% between December and January.

What pushed UK inflation lower in January?

The biggest disinflationary effects in the year to January came from transport, food and non-alcoholic beverages, and housing and household services.

“Inflation fell markedly in January to its lowest annual rate since March last year, driven partly by a decrease in petrol prices,” said Grant Fitzner, chief economist at ONS.

“Airfares were another downward driver this month with prices dropping back following the increase in December,” Fitzner continued, adding that lower food prices also supported the slowdown in UK inflation over the period.

On the other side of the ledger, health costs and restaurants and hotels were the biggest upward drivers of UK price increases over the period, both contributing 0.03 percentage points to CPI inflation.

What is inflation?

Inflation is an economic metric that measures the rate at which prices are rising within an economy. It is one of the key metrics observed by policymakers, including politicians and, crucially, central bank interest rate-setters, in order to make decisions relating to the economy.

There are various ways of measuring inflation, but the key one is CPI. This is the inflation metric that most economists and policymakers regard as the headline measure of inflation in the UK and worldwide.

Most economists view 2% as the optimal CPI rate for a healthy economy. It implies that prices are rising (which indicates economic growth), but slowly enough not to become unmanageable for business and household budgets.

How does UK inflation impact your money?

Inflation impacts your money both directly and indirectly.

Directly, the rate of inflation reflects the pace at which the price you pay for goods and services increases. Assuming your income doesn’t change, higher rates of inflation will mean you have less purchasing power; your monthly budget may not stretch as far or you may not have as much disposable income left once you’ve paid for your essentials.

Indirectly, it impacts various aspects of the economy that are in turn reflected in your finances. This could include increases in the bills you pay (many utilities, for example, increase annually in line with retail prices index (RPI) inflation) or pay rises from your employer, but most importantly, inflation feeds into interest rates.

Central banks, such as the Bank of England, raise or lower interest rates in order to balance controlled inflation against healthy economic growth. When inflation is running high or expected to rise, policymakers (specifically the MPC) raise interest rates in order to discourage inflation. When economic growth is weak, they lower them in order to stimulate growth.

Interest rates in turn feed into various key components of your personal finances. For example, higher rates mean you’ll likely pay more interest on your mortgage. But at the same time, they also mean you should earn more interest on your savings or cash ISA.

So a drop in UK inflation now could have implications for your finances next time the MPC meets to set interest rates.

Summary

• The Bank of England’s Monetary Policy Committee met today to decide its latest UK interest rates decision.
• As expected, the MPC voted to hold rates at 3.75%.
• Last time it met, the MPC cut rates in a narrow 5-4 vote.
• Today's vote also came down to a 5-4 split in favour of holding UK interest rates: this was much narrower than most observers had expected.
• The MPC has indicated it will balance concerns over a weakening economy with the risk of persistent inflation.

| When will interest rates fall further? | UK inflation forecast | MPC meeting dates |

Good morning, and welcome to live coverage of today’s UK interest rate meeting at the Bank of England.

Experts overwhelmingly expect the Monetary Policy Committee (MPC) to hold rates at 3.75% today. Will we see a deviation from this prediction? It would come as something of a shock if so.

Whatever happens, stick with us here as we bring you live preview in the run-up to the decision, as well as reaction in its aftermath.

December’s inflation uptick makes a hold more likely

Inflation is arguably the most influential factor on MPC interest rate decisions. The Bank of England has a remit to keep inflation around 2%, and interest rate changes are the key lever it uses to achieve this.

Higher interest rates have the effect of limiting consumers’ disposable income. That, in theory, reduces demand across the economy, which has a dampening effect on inflation.

The latest bout of inflation appears to have peaked at 3.8% between July and September. It had been coming down faster than expected in the meantime, which helped the MPC justify a rate cut in December.

But last month’s inflation reading (covering December) showed a rise in inflation to 3.4%. While widely expected, this will likely discourage the MPC from making a second successive cut – something it hasn’t done since the first quarter of 2020, when the Covid pandemic looked set to collapse the economy.

"We expect the UK’s disinflationary trend to continue through 2026, with slack in the labour market steadily increasing,” said Grant Slade, economist at investment research firm Morningstar. “However, the Bank of England is likely to hold rates this month as it waits for further evidence that wage growth and broader price pressures are softening.”

When does the MPC announce UK interest rates?

The MPC’s decision will be announced today at 12pm.

We’ll bring you the result as it lands. Stay tuned!

The trajectory of UK interest rates

December’s cut was the latest in a gradual cycle of interest rate cuts that have seen UK base rate fall to 3.75%, from 5% in August 2024.

The steep rise in interest rates from January 2022 onwards reflects the Bank of England’s attempt to control inflation, which spiked in the wake of Russia’s invasion of Ukraine.

Throughout the recent cutting cycle, the MPC has never cut UK interest rates in two consecutive meetings. It isn’t expected to change that approach today.

Economists predict a rates hold

Persistent inflation combined with the cadence, to date, of the MPC’s interest rate cutting cycle means that most experts and economists expect rates to be held where they are today.

“The majority of MPC members anticipate further rate cuts will be required, but they're concerned about the potential strength of 2026 pay awards and their impact on inflation,” said Edward Allenby, senior UK economist at advisory firm Oxford Economics.

While the economy is in a precarious state, there hasn’t been enough fresh data, particularly on what is happening with inflation, since the last meeting to be able to justify a successive cut.

“The data flow since the MPC’s last meeting does little to change the risk balance between persistent inflation and weak growth,” said Robert Wood, chief UK economist at advisory firm Pantheon Macroeconomics.

What to watch for in today’s MPC meeting

Meetings like today’s, when the verdict on UK interest rates is almost a foregone conclusion, can feel like a damp squib. But there will still be key talking points: specifically, the split of votes among the nine-person MPC panel, and the forward guidance they issue.

Robert Wood, chief UK economist at advisory firm Pantheon Macroeconomics, expects a 6-3 vote split in favour of holding rates at 3.75%, while Edward Allenby, senior UK economist at advisory firm Oxford Economics, expects a 7-2 split.

“We don't think the recent data have been weak enough to convince a majority on the committee to vote for a February cut next week,” said Allenby. “Indeed, there's a good chance that the vote split will be wider than December's 5-4 decision, with just [Swati] Dhingra and [Alan] Taylor likely to vote for a cut.”

The minutes of the meeting published afterwards, will also be closely scrutinised by experts to gain a clearer picture of when UK interest rates might next be cut.

“Key things to watch here will be the debate around the weak labour market versus firming price pressures in survey data, including wage settlements from the Bank's Agents survey,” said Sanjay Raja, chief UK economist at Deutsche Bank. “We will be looking at positioning within the MPC and how much weight each member puts on each matter. Any dissenters beyond Taylor and Dhingra will be important to keep an eye on too.”

How are UK interest rates decided?

As we approach the announcement of today’s Monetary Policy Committee (MPC) meeting, it’s worth taking a look at who makes up the committee, and how it sets UK interest rates.

The MPC is made up of nine members. These are the governor of the Bank of England (currently Andrew Bailey) who serves as the committee’s chair, three deputy governors for monetary policy (Clare Lombardelli), financial stability (Sarah Breeden) and markets and banking (Dave Ramsden), the chief economist (Huw Pill) and three external members that are appointed directly by the chancellor (Swati Dhingra, Alan Taylor and Catherine Mann).

The committee assesses the available economic data in a series of meetings before voting on a proposal regarding UK interest rates put forward by the governor. All members then vote either for or against the proposal – if against, they are asked to state what alternative policy they would support. A majority is required for the policy to become set.

In the rare event of a tie (which requires at least two different alternative policy suggestions given there is an odd number of committee members), then the committee votes again.

What do you think will happen to UK interest rates?

It’s nearly midday, which means the MPC’s UK interest rates decision is nearly with us.

Which way do you see it going? Let us know in our poll:

BREAKING: UK interest rates held

To the surprise of absolutely no-one, the MPC has voted to hold UK interest rates at 3.75%.

The key variables today are the comments and outlook from the committee. We’ll bring you detailed analysis shortly.

MPC vote split surprisingly close

The headline result is not a surprise, but the tightness of the vote certainly is.

The UK interest rates hold went through with a 5-4 majority, meaning that, for the third consecutive meeting, Bank of England governor Andrew Bailey effectively cast the deciding vote.

Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor all voted to cut rates by 0.25 percentage points.

Wage growth is trending in line with target-level inflation

Two of the surprise dissenters, Sarah Breeden and Dave Ramsden, both highlighted the fact that wages are trending downwards as in their rationale for voting for a cut.

"Wage growth is set to end this year at target-consistent levels; structural change in the labour market now appears less likely to have occurred; and slack is judged to be a little wider both now and over the forecast," said Breeden.

"Core disinflation is clearly progressing with cumulative weakening in the labour market" said Ramsden. "I am increasingly confident that wage growth will fall to target-consistent rates this year."

Will we see further UK interest rate cuts soon?

Many commentators expect the next cut to come in April rather than at the next meeting in March, but comments from other committee members could be read as undermining this assumption.

"New analysis and current developments have moved the appropriate time for a cut in Bank Rate closer," said Catherine Mann. Bank of England governor Andrew Bailey indicated that he sees "scope for some further easing of policy", but emphasised that he doesn't expect a cut at any particular meeting.

"A cut at the next Bank meeting in March is most certainly on the table," said Luke Bartholomew, deputy chief economist at investment firm Aberdeen. "And even if it takes a bit longer for the next cut to come through, we still think there is a strong case for rates to eventually fall to 3% later this year."

UK interest rates still trending downwards

Here’s how today’s UK interest rates decision looks against the historical trend:

“The Bank of England has pushed a big red pause button on interest rate cuts as caution remains the name of the game and policymakers assess flickering growth and stubborn inflation,” said Susannah Streeter, chief investment strategist at Wealth Club. “Although the signs are that the price spiral will be dampened down in the coming months, they’ve judged that it’s still too early to move, especially given signs that growth in the economy is showing tentative signs of making a comeback.”

Streeter also highlighted that the tight vote came as a surprise and perhaps signposts a rate cut sooner than some expected.

“It puts a cut in March still very much in the picture,” she said. “The labour market is showing weakness, Budget changes are set to bring down energy and transport costs and a wave of cheaper Chinese goods are heading this way. So, more policymakers could well be swayed to vote for lower borrowing costs next month.”

"A bus that may or may not be running"

The balancing act that the MPC's members are attempting is palpable in today's meeting minutes. On the one hand, there is a clear appetite to cut in order to bolster the economy, but timing this so as to keep inflation on a downward path is absolutely key.

"The Bank’s tone highlights how cautiously policymakers are approaching this stage of the cycle," said Patrick Farrell, group chief investment officer at investment manager Charles Stanley. "With signals from inflation and the labour market still mixed, they’re navigating a far more stop-start environment than in the past.

"At times, it feels like waiting for a bus that may or may not be running," said Farrell. "There’s no set timetable, and each move now depends on whether upcoming data gives the Bank enough confidence to act."

FTSE rises on MPC’s dovish hold

The stock market has not been having a good day today, but the unexpectedly tight vote does seem to have given a small boost for UK stocks.

The FTSE 100 climbed around 0.4% while the FTSE 250 climbed around 0.2% immediately after the MPC’s report was released, though both indices remain below yesterday’s close.

In very broad terms, lower interest rates tend to benefit stocks as they encourage economic growth and investment.

UK interest rates: inflation outlook is revised lower

Today’s MPC meeting notes included surprisingly dovish comments even from some members who voted in favour of holding interest rates at their present level.

The Monetary Policy report which has been released alongside today’s announcement reveals that the Bank now expects inflation to fall towards the target level of 2% sooner than had been expected. In fact, it states that headline CPI inflation could fall to 2.1% as soon as Q2 this year – largely thanks to the energy bills package unveiled in the Autumn Budget.

The last Monetary Policy report, published in November, put the equivalent figure at 2.8%.

How do interest rates affect your money?

In general, higher interest rates are good for savers (because they earn more interest on their savings) and bad for borrowers (because they pay more interest on their debt).

“Savers may welcome the prospect of higher returns for longer, but borrowers hoping for additional relief from high mortgage or debt repayments will need to stay patient for now,” said Alice Haine, personal finance analyst at online investment platform Bestinvest.

“Living costs remain high and borrowing costs are still elevated compared with the long era of ultra-low interest rates that followed the Global Financial Crisis,” Haine added. “Combined with the stealth impact of frozen income tax thresholds, this is making it harder for some households to balance the books.”

Recap: UK interest rates held at 3.75%

As a recap: the MPC held UK interest rates at 3.75% today, as widely expected, but the headline was a narrow 5-4 vote split (some experts had predicted as many as seven committee members voting to hold rates steady) and unexpectedly dovish comments from some committee members.

This has seemingly opened the door for a rate cut at the next meeting in March, something which most observers felt was unlikely ahead of today’s meeting.

The Bank of England now expects the rate of inflation to fall faster through the first half of this year than it did at the time of its November meeting, when it last published a Monetary Policy report.

Thanks for following live coverage of today's UK interest rates decision. We're going to end our coverage here at this point, but keep a close eye on MoneyWeek.com over the coming days as we bring you more analysis of today's decision and what it means for you.

UK inflation: summary

• The Office for National Statistics (ONS) has released the latest UK inflation data today (21 January).
• The data shows the Consumer Price Index (CPI) measure of inflation rose by 3.4% in the 12 months to December
• Analysts expected CPI to have risen by this amount; the Bank of England’s latest forecast projected a 3.5% increase.
• In the 12 months to November, CPI rose by 3.2%, below analyst predictions that had been as high as 3.6%.
• The Bank of England projects that CPI will fall to 3.0% in January, and to 2.5% by the fourth quarter of 2026.

| What is inflation? | Upcoming CPI release dates | Your personal inflation rate |

Good afternoon, and welcome to our coverage of the latest UK inflation data.

The Office for National Statistics (ONS) announces the latest Consumer Prices Index (CPI) inflation data, covering the year to December 2025, tomorrow morning.

The previous release, covering November, showed a surprise drop in year-on-year inflation to 3.2%; the Bank of England had forecast a reading of 3.4% while some analysts had forecast as high as 3.6%.

But December’s read could paint a gloomier picture. The Bank of England’s latest available projections (dated 5 November) expect CPI to have risen to 3.5% in the 12 months to December, and other analysts also expect UK inflation to have risen from the previous month.

Follow us here at MoneyWeek for rolling preview analysis ahead of tomorrow’s announcement, plus live coverage of the release and reaction tomorrow morning.

Economists expect UK inflation to have risen in December

The latest Bank of England forecasts point to a jump to 3.5% in CPI inflation tomorrow.

These forecasts are a little dated – they were included in the Monetary Policy Report that accompanied the MPC’s last-but-one meeting, on 5 November. There have been two inflation data releases (covering October and November) since then, and both reads undershot expectations.

But economists still broadly forecast UK inflation to be higher in the year to December than it was in the year to November.

There is some uncertainty over the date on which inflation data will have been gathered; 9 December would be four weeks after the previous data collection, but it is unusually early in the month.

The alternative, 16 December, is a more appropriate date but would make it the fifth five-week gap between collections of 2025, and it is unusual to have that many five-week gaps in a calendar year.

The collection date could materially change the outcome, as prices tend to increase in the run-in to Christmas.

Robert Wood, chief UK economist at Pantheon Macroeconomics, forecasts CPI to have risen 3.3% assuming that data is collected on 9 December, rising to 3.4% if it is collected on 16 December.

Sanjay Raja, chief UK economist at Deutsche Bank, expects a headline CPI inflation figure of 3.4%, though he said this could be higher if (as he expects) data is collected on the later date.

When is UK inflation data announced?

UK inflation data for the 12 months to December will be announced at 7am on 21 January.

We will bring you live analysis and reaction to the ONS data tomorrow morning following the release.

UK inflation's recent history

It has been a turbulent few years for UK inflation.

Following the Covid pandemic, inflation was running at historically low levels – just 0.2% in August 2020. Most economists would argue that inflation rates this low are economically unhealthy; 2% is regarded as the optimal rate, which is why the Bank of England targets this level.

From the second half of 2021, though, the rate of inflation rapidly passed beyond this optimal rate, peaking at 11.1% in October 2022.

Since then, inflation has gradually been trending downwards. The 2024 Autumn Budget caused a temporary bump as inflationary measures like increased employer National Insurance contributions came into effect from April, but following a three-month plateau at 3.8% over the summer, inflation now appears to be coming down.

What is CPI inflation?

You might be asking yourself, what is inflation?

Inflation is a measure of the pace at which prices are increasing within an economy. A higher rate of inflation means that prices rose faster, while a slower rate means they fell slower.

A fall in inflation doesn’t indicate a fall in prices, unless the inflation number turns negative (which is known as deflation). But a fall in inflation from, say, 3% to 2% means that prices still rose, just at a slower rate than in the previous period.

There are various different ways to measure inflation. The Consumer Prices Index (CPI) is viewed as the key metric by economists, but there are others including Consumer Prices Index including owner occupiers’ housing costs (CPIH), which includes the costs of owning, maintaining and living in a home, and the Retail Prices Index which includes costs associated with home ownership.

The longer-term UK inflation outlook

UK inflation looks set to come in somewhere above 3% in the December release.

But what is the longer-term outlook for UK inflation, and when is it likely to return to the 2% level that economists target?

Analysts at the Bank of England expect UK inflation to fall to 3.1% in the first quarter of this year, and to fall below 3% in the second quarter. Inflation is expected to average 2.5% in the final quarter of the year.

In Q1 of 2027, the bank forecasts that inflation will have fallen to close to its target rate of 2%, and that it will fall below it the following quarter.

What does inflation mean for your money?

Inflation erodes the purchasing power of money.

It is related to interest rates, in that policymakers will generally raise rates when inflation is high (in order to reduce the amount of available money within the economy, which lowers demand and thus prices) and reduce them when inflation is low (in order to stimulate more economic activity).

But the relationship isn’t perfect, and other factors – particularly the overall health of the economy – impact interest rates. The UK is currently enduring a period of elevated inflation alongside lacklustre growth, meaning that interest rates are falling despite inflation running well above the 2% target rate.

That is bad news for savers in particular, because the returns on saved cash may not beat inflation, meaning that savings held for the long term are actually losing value in real terms.

“Falling inflation puts the spotlight firmly on getting the best possible return,” said Harriet Guevara, chief savings officer at Nottingham Building Society. “As expectations grow that interest rates will start to come down, savings rates are likely to follow. That makes now an important moment to shop around, while competition between providers is still delivering strong returns.”

The impact of inflation on long-term cash holdings is also a reason to consider starting to invest some of your disposable income.

Poll: Do you think UK inflation rose in December?

Let us know your thoughts by voting in our poll:

Thank you for following our preview of the latest UK inflation data release today. We're going to pause coverage here for this evening, but join us first thing tomorrow morning as we report on the latest UK inflation figures live from 7am.

Good morning and welcome back to our live UK inflation blog.

The Office for National Statistics (ONS) will be announcing December's figures shortly.

Stay with us for live coverage, rolling reaction and analysis.

BREAKING: UK INFLATION ROSE TO 3.4% IN DECEMBER

The UK’s Consumer Price Index (CPI) rate of inflation rose in the 12 months to December in part due to higher tobacco prices, the ONS said.

A rise in the cost of airfares, likely due to higher prices over the Christmas period, also drove the slight uptick on the month before.

The ONS said rises in the price of tobacco and transport were partially cancelled out by falls in the cost of furniture and household goods and recreation and culture activities such as TV subscriptions and trips to the cinema.

Prices across the health and communication sectors also fell.

The Consumer Price Index (CPI) rate of inflation is not the only measure tracked by the ONS.

It also releases Consumer Price Index including owner occupiers' housing costs (CPIH) data which includes the costs of owning, maintaining and living in a home.

It is considered the most comprehensive measure of inflation published by the ONS.

The ONS has published the CPIH measure of inflation for the 12 month to December today (21 January), which shows a rise of 3.6%, up from 3.5% in November.

December uptick 'short-lived'

The latest CPI inflation data is a blow for the Bank of England (BoE) which has a 2% target it is supposed to meet.

However, Alice Haine, personal finance analyst at investment platform Bestinvest by Evelyn Partners, said the December figures were just an uptick and inflation would come down in early 2026.

Haine said: "The combination of tax rises and spending restraints introduced in the Autumn Budget, along with a cooling labour market and slowing wage growth, are likely to act as a drag on prices."

Haine also pointed to core inflation, which strips out more volatile items such as food, alcohol and tobacco, holding at 3.2% in December.

Core inflation is considered important because it provides a clearer picture of long-term price rises.

How has inflation changed over time?

Both the CPI and CPIH measures of inflation, while rising slightly in December, have broadly fallen from peaks of 11.1% and 9.6%, respectively, in October 2022.

The CPI rate of 11.1% in October 2022, driven in part by soaring energy prices, was the highest the measure had been for four decades.

What does the latest inflation data mean for interest rates?

The Bank of England most recently cut interest rates from 4% to 3.75% in December as it looks to kickstart growth in the UK economy.

However, rising inflation could cause the bank's Monetary Policy Committee (MPC), which sets rates, to take a more cautionary approach at its next meeting in February.

Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales (ICAEW), said the December inflation figures made a February rate cut "look improbable", "particularly as policymakers may want to assess the effect of escalating geopolitical tensions before loosening policy again".

A closer look at the figures

The main drivers of the uptick in inflation in the 12 months to December were alcohol and tobacco, transport and food and non-alcoholic drinks.

Here's a breakdown of exactly how much prices rose across these categories.

Alcohol and tobacco

Alcohol and tobacco prices rose by 5.2% in the 12 months to December. This was a sharp increase from 4% in the 12 months to November.

The ONS said the uplift was mostly caused by a rise to Tobacco duty in November.

Transport

Prices across the transport sector went up by 4% in December, a rise from 3.7% in November.

The spike was mainly caused by an increase in air fares, which rose by 28.6%.

Food and non-alcoholic drinks

Food and non-alcoholic beverages prices rose by 4.5% in the 12 months to December, up from 4.2% in the 12 months to November.

Chancellor reacts to the latest inflation figures

The chancellor Rachel Reeves has responded to this morning’s inflation data, saying that driving down people's bills and everyday costs is her "number one focus".

"At the Budget I announced £150 off energy bills, a freeze to rail fares for the first time in 30 years, a freeze to prescription charges for the second year running, and an increase to the national minimum and living wage.

"Money off bills and into the pockets of working people is my choice. There’s more to do, but this is the year that Britain turns a corner."

The policies announced by the government to drive down people's bills are forecast by the Office for Budget Responsibility (OBR) to lead to a reduction in CPI inflation of 0.4 percentage points in the 2026/27 financial year.

Savers face falling returns despite inflation outlook

Caitlyn Eastell, finance expert at Moneyfacts, said the latest inflation data signalled bad news for savers.

The Moneyfacts Average Savings rate sits at 3.33% as of 21 January, lower than December's rate of inflation.

Anyone with a savings account paying this level of interest is effectively losing money in real-terms and should switch to an account paying a higher rate.

Eastell said: "January is the ideal time for savers to set new financial goals and to check if their savings are working as hard as they can."

According to Moneyfacts, the best-paying easy access account is currently with Chase, which is paying 4.41% interest (including a bonus rate).

The best one-year fixed bond is with Marcus by Goldman Sachs, paying 4.55%. The best easy access ISA is with Plum, paying out 4.28% in interest.

What does higher inflation mean for mortgage rates?

The Bank of England can increase interest rates to curtail rising inflation, but this tends to lead to higher mortgage rates.

That said, the central bank is keen to kick start the economy, so while immediate further rises in interest rates are not likely, mortgage borrowers may have to wait longer for cuts.

David Hollingworth, associate director at broker L&C Mortgages, said: "The rise in the rate of inflation in December was not unexpected but is a larger bump than many anticipated. That could be enough for the Bank of England to pause any thought of another cut when they meet in February."

Hollingworth pointed out a lot of lenders had already priced further cuts to interest rates in 2026 into their fixed-rate mortgages, but today's inflation data could "mean that we’re in for a period where the brakes are applied and mortgage rates flatten out".

Housing and household services the largest contribution to CPIH annual inflation rate for 18th consecutive month

Households will feel the effects of inflation differently

Because the ONS calculates inflation based on a representative basket of goods and services, which is subject to change, households will experience it differently.

For example, if more of your spending is weighted towards food or travel, any rises in these categories will be felt by you more.

Charlotte Kennedy, chartered financial planner at Rathbones, said: "While headline inflation guides monetary policy, it rarely captures the full picture of how price pressures are felt across the economy."

What items were added to the ONS's basket of goods and services in 2025?

As previously mentioned, the ONS tracks price changes across a range of goods and services when reporting its inflation data. What is included in this basket of goods and services is subject to change each year.

In 2025, virtual reality (VR) headsets were added, as well as men's sliders, cushions and ready-to-eat noodles.

Other items already in the basket were taken out, including fresh diced or minced turkey.

When will January's inflation data be released?

The ONS releases inflation data each month for the preceding month. That's why the data released today covers the month of December.

The ONS will release inflation data for January on 18 February.

You can find out when the ONS is set to release inflation, GDP and wages data on its website.

Inflation rises for first time in five months

The last time the CPI measure of inflation rose was in July 2025, when it ticked up to 3.8% from 3.6% the month before.

It stayed at 3.8% in August and September, fell to 3.6% in October and then slowed to 3.2% in November.

Where is inflation headed next?

It's impossible to say for sure where inflation will head next, but the Bank of England has made predictions.

It projects that CPI will fall to 3% in January and to 2.5% by the fourth quarter of 2026.

Further down the line, it expects CPI will slow to 2% by the end of 2027 and then rise to 2.1% by the close of 2028.

Recap: UK inflation rose to 3.4% in December

Here’s a recap of this morning’s UK inflation headlines:

• UK inflation, as measured by the Consumer Prices Index (CPI), rose to 3.4% in the 12 months to December, up from 3.2% in the year to November.
• Alcohol and tobacco, transport and food and non-alcoholic drinks were the main drivers of the uptick in inflation, particularly a 28.6% increase in air fares.
• The jump is widely expected to be short-lived. Bank of England forecasts expect UK inflation to fall to 3.0% in January.

Could petrol price deceleration lower UK inflation?

One counterweight to the general acceleration in UK price increases in December was a slowdown in the pace at which petrol prices rose.

Petrol prices rose by 1.3 pence per litre between November and December 2025 compared to 1.5 pence per litre in the same period a year before.

“Petrol pump price rises slightly levelled off,” said Scott Gardner, investment strategist at J.P. Morgan Personal Investing. “We could see further weakening in the months ahead with recent falls in global oil markets expected to feed through to prices at petrol station forecourts.”

One to watch for motorists and consumers in general over the coming months.

We're going to end our inflation coverage here for today. Thank you for following, and visit our homepage for all the latest personal finance and investing news.

Summary

• The Bank of England’s (BoE) MPC has cut interest rates from 4% to 3.75%
• The MPC last met on 6 November when it held rates at 4%
• The market was widely expecting the MPC to lower interest rates following weakening jobs data, slowing inflation and the UK economy stagnating

| When will interest rates fall further? | UK inflation forecast | MPC meeting dates |

Bank of England’s MPC digesting economic data

Good afternoon, and welcome to our live coverage ahead of tomorrow’s announcement from the Monetary Policy Committee (MPC) on whether it will raise, hold or cut UK interest rates.

The meeting follows a string of macroeconomic news for the UK.

Data published by the Office for National Statistics (ONS) today (17 December) revealed that inflation as measured by the Consumer Prices Index (CPI) slowed to 3.2% in the 12 months to November. This is down from 3.6% in the 12 months to October.

Labour market figures released yesterday (16 December) showed UK unemployment rose to an almost five-year high of 5.1% in the three months to October.

The latest GDP figures from the ONS show the UK economy unexpectedly shrank in the three months to October, falling by 0.1%.

All of this will be keenly reviewed by MPC, who will then decide on where to set interest rates. A stagnant economy, rising unemployment and slowing inflation all suggest a base rate cut is on the way, despite inflation still running ahead of the BoE’s 2% target.

Follow our preview and reaction coverage of the MPC’s decision in this live report.

When is the MPC’s interest rates decision announced?

The MPC will confirm its UK interest rate decision at midday (12pm) tomorrow (18 December).

Stay with us for live reaction to the decision and what it may mean for your finances.

Why does the Bank of England review interest rates?

The Bank of England (BoE) reviews its base rate, eight times a year, as a lever to control inflation but also to stimulate growth in the UK economy.

The government sets an inflation target of 2% for the bank to meet. This is seen as a healthy rate of price rises for an economy.

The theory is that increasing interest rates encourages people to save money and not spend it, which in turn slows inflation.

Conversely, lowering interest rates reduces the cost of borrowing and can encourage people to spend their money rather than save it, which can stimulate growth in the economy.

What is the Monetary Policy Committee expected to announce?

All the signs point to a base rate cut tomorrow. In a research note published last week, one of the ‘big four’ banks HSBC said it expects a cut by 25 basis points to 3.75%.

This, HSBC said, was in line with market expectations, which is pricing in a 93% chance of a cut.

With labour market data showing unemployment on the rise and inflation data from today (17 December) showing price rises have slowed, this suggests a base rate cut is even more likely.

Alice Haine, personal finance analyst at online investment platform Bestinvest by Evelyn Partners, said: “The headline rate of inflation plunged to 3.2% in the 12 months to November, coming in lower than expected, raising the likelihood that the Bank of England will press ahead with a sixth interest rate cut tomorrow and deliver some much-needed respite for Budget-battered Britons ahead of Christmas.”

The Bank of England base rate over time

The base rate has gradually fallen from a high of 5.25% in 2024 – it has been cut five times since then and currently sits at 4%.

The base rate started climbing in December 2021, from 0.1%, as the Bank of England looked to cool runaway inflation that soared in part due to a rise in global demand for goods and higher energy prices.

What is the Monetary Policy Committee?

The Monetary Policy Committee (MPC) is a committee of nine members working for the Bank of England.

The committee is made up of one governor, currently Andrew Bailey, three deputy governors, a chief economist and four external members appointed directly by the chancellor, currently Rachel Reeves.

A representative from the Treasury also sits in on MPC meetings, but isn’t allowed to vote.

A decision on whether the base rate goes up, down, or stays the same, is based on a majority voting system. For example, at the last MPC meeting, five members voted to hold base rate at 4% while four voted to reduce it by 0.25 percentage points to 3.75%, so base rate stayed at 4%.

Why has inflation slowed to 3.2%?

The latest data from the Office for National Statistics (ONS) reveals the Consumer Price Index measure of inflation slowed to 3.2% in the 12 months to November, down from 3.6% in the 12 months to October.

According to last month’s Monetary Policy Committee report, the Bank of England expected inflation to fall to a higher 3.4%. So what is behind the bigger-than-expected fall?

The ONS said lower food prices were the main driver of the fall, with prices rising less quickly on cakes, biscuits and breakfast cereals. Tobacco prices and women’s clothing prices also helped pull the CPI rate down, the ONS said.

What dates will the Monetary Policy Committee make base rate announcements in 2026?

The Monetary Policy Committee will make eight announcements next year following base rate reviews.

These are the dates it will make announcements in 2026:

• 5 February
• 19 March
• 30 April
• 18 June
• 30 July
• 17 September
• 5 November
• 17 December

Monetary Policy Committee 'poised to cut rates'

The Monetary Policy Committee (MPC) is “poised to deliver an early Christmas present to markets in the form of another interest rate cut on Thursday”, said Matthew Ryan, head of market strategy at financial services firm Ebury.

Today’s larger-than-expected fall in CPI inflation will encourage the doves on the committee, who have previously pushed for cuts in order to support the UK’s faltering economy. But the vote of Bank of England governor Andrew Bailey could be decisive.

“On balance, we think that governor Bailey will side with the doves, but with the rest of the committee seemingly entrenched in their views, he may be the only official to change their vote from the previous meeting,” said Ryan.

Thanks for following our rolling preview of tomorrow's UK interest rates decision. We're finishing here for today, but join us again tomorrow morning for more preview analysis as well as live coverage of the decision and reaction from midday.

Good morning and welcome back to our live blog as we await the announcement of the Monetary Policy Committee’s base rate decision. We'll bring you live reaction and analysis following the announcement at midday.

How do you think the Monetary Policy Committee will vote on interest rates?

Where is inflation heading?

The latest Consumer Price Index (CPI) measure of inflation showed prices rose by 3.2% in the 12 months to November, according to the Office for National Statistics (ONS). But where will prices go next?

According to the Monetary Policy Committee’s latest Monetary Policy report, the CPI measure peaked at 3.8% this year.

It predicts it will be at 3.2% in March 2026, slowing to 2.5% at the end of next year, then reaching the 2% target by the last quarter of 2027.

Financial expert predicts 5-4 vote split

The last MPC meeting ended in a 5-4 vote split in favour of holding rates at 4%. That effectively meant that Bank of England governor Andrew Bailey – viewed as one of the centrists among the MPC panel – had the deciding vote.

Matthew Ryan, head of market strategy at financial services firm Ebury, expects that today’s meeting will see the same vote split, but that Bailey will opt to side with the doves on the committee.

“The November meeting minutes suggested that he was very close to doing just that last time out,” says Ryan. “The real question is whether any of the hawks follow suit.”

In a monetary policy context a hawk is someone who prioritises controlling inflation with tight monetary policy, as opposed to a dove who prioritises economic growth with looser policy.

Ryan doesn’t expect any of the MPC’s hawks to follow suit, given that most have expressed hawkish views in recent comments.

“Chief economist [Huw] Pill could make it a 6-3 vote, but he has also voiced a preference for a slow removal of policy restriction during his latest remarks, so he may again opt for no change,” said Ryan.

How closely have you been following the macroeconomic news this week?

BREAKING: As widely expected, the MPC has voted to lower interest rates, from 4% to 3.75%.

How did the Monetary Policy Committee vote?

The Bank of England’s (BoE) Monetary Policy Committee voted 5-4 to cut interest rates.

Andrew Bailey, governor of the BoE, said bank rate is expected to fall gradually in the future, depending on pay growth and services inflation continuing to ease.

Reeves responds to interest rates cut

Chancellor of the exchequer Rachel Reeves has responded to the news that the MPC has cut UK interest rates to 3.75%.

“This is the sixth interest rate cut since the election - that's the fastest pace of cuts in 17 years, good news for families with mortgages and businesses with loans.

"But I know there's more to do to help families with the cost of living. That's why at the Budget we froze rail fares and prescription charges, and will be cutting £150 off the average energy bill next year.”

Reduction in interest rates 'not a signal that borrowing costs are about to fall sharply'

Holly Tomlinson, financial planner at wealth management firm Quilter, said while today's interest rate cut showed there is growing confidence inflationary pressures are easing, it doesn't mean borrowing costs "are about to fall sharply across the board".

"With inflation still above target and policymakers keen to avoid reigniting price pressures, this move is best seen as a cautious adjustment rather than a decisive shift towards looser monetary policy, particularly at a time when household finances remain under strain from years of higher prices and frozen tax thresholds," Tomlinson added.

Monetary Policy Committee still committed to gradual cuts

The rate cut was viewed as a near-certainty by the markets, but with a 5-4 vote split it is clear that the MPC itself didn’t view the decision as a given.

“The decision to cut rates to 3.75% reflects a mixed economic picture, with UK growth relatively flat over the second half of this year while the latest inflation data came in softer than expected,” said Brad Holland, director of investment strategy at J.P. Morgan Personal Investing.

Holland highlighted that “the cooling across the UK economy over recent months has been a cause for concern for many in the market”.

Despite these concerns, four members – Megan Greene, Clare Lombardelli, Catherine L Mann and Huw Pill – viewed the risk of above-target inflation as greater than the threats to the economy.

“For now, it is clear to onlookers that the Bank of England continues to be focused on a ‘gradual’ approach to the rate-cutting cycle,” said Holland. “This may disappoint those who hope that faster rate cuts will spur economic growth and reduce borrowing costs, but with uncertainty still high, policymakers remain cautious.”

Bailey: Disinflation is established

Governor of the Bank of England Andrew Bailey was the swing voter across the MPC’s last two meetings, switching from a hold in November to a cut today and taking the MPC’s decision with him.

“Data news since our latest meeting suggests that disinflation is now more established. CPI inflation has fallen from its recent peak and upside risks have eased,” Bailey said in his comments. “Measures in the Budget should reduce inflation further in the near term. The key question for me now is the extent to which inflation settles at the 2% target in an enduring way.”

Bailey also highlighted the dilemma that the MPC faces: weakness in recent labour market data indicates a faltering economy, but “on the other hand, inflation expectations have not yet shifted downward sufficiently following the past few years of persistent above-target inflation”.

What does an interest rate cut mean for my pension?

Interest rate changes can have a big impact on retirees' income, for better or worse.

Adam Cole, retirement specialist at Quilter, said: “An interest rate cut can have very different effects across the pensions landscape, and the impact will depend largely on the type of pension someone holds and what they are planning to do with it.”

Impact on defined benefit pensions

If you have a defined benefit pension, lower interest rates could be good news. This is because they tend to push up transfer values – the amount of lump sum you could get instead of receiving a guaranteed, regular income.

But higher transfer values are not automatically a green light to transfer.

“Giving up a guaranteed, inflation-linked income for life remains a significant step, and one that should only ever be considered with specialist advice,” Cole cautioned.

Impact on defined contribution pensions

If you have a defined contribution pension – like the majority of people – the impact of a base rate cut depends on how it is invested.

Rate cuts tend to be good for equities, so if your pension is heavily invested in shares it could get a boost. But they also tend to push bond yields lower, which can affect the long-term income potential of lower-risk assets.

“This highlights the importance of asset allocation and not viewing pensions purely through the lens of short-term interest rate moves”, Cole said.

Impact of an interest rate cut on annuities

Annuity pricing remains closely linked to gilt yields, meaning any sustained move lower in interest rates would be expected to put downward pressure on the income available to new annuity buyers.

Yet ahead of the base rate cut, gilt yields remained stubbornly high. As a result, annuity rates remain among the most competitive seen in the past decade.

For example, at the start of this year, a Canada Life benchmark lifetime annuity purchased with £100,000 would have provided an annual income of around £6,800 for a healthy 65-year-old.

Yesterday, improved rates mean the same individual could secure approximately £7,300 per year – an increase that amounts to nearly £9,500 in additional income over a 20-year retirement, by Canada Life’s calculations.

Could falling interest rates help boost UK stocks?

The FTSE 100 is set for its best year since 2013, and looks likely to deliver better returns through 2025 than the S&P 500.

But the large-cap index generates most of its revenue from overseas. Small- and mid-cap UK stocks haven’t had quite as much joy so far this year, with the FTSE 250 returning around 10% this year.

If Bank of England governor Andrew Bailey is correct in his view that inflationary pressures are coming under control, then falling interest rates could be good news for more domestically-focused UK stocks.

“UK household balance sheets are healthy, and savings rates elevated,” said Alex Wright, portfolio manager of Fidelity Special Values. “With inflation easing and interest rates likely to follow, improving confidence could support consumption.”

Read more in senior writer Dan McEvoy's article on the prospects for UK stocks in 2026 here.

Interest rates on savings set to slip

The base rate cut is good news for borrowers but a blow for savers. Interest rates on savings accounts are likely to slip further, so savers looking to make their cash work harder may want to act now and secure the best savings rates on the market.

If you’re willing to lock your savings away, you might want to consider the top fixed rate savings accounts. At the time of writing, the top one-year fixed savings account is the One Year Fixed Term Deposit from Al Rayan Bank Meteor Savings, which pays an expected rate of 4.55%.

The latest inflation reading came in at 3.2%, so make sure your savings are earning more than this, to prevent your money from being eroded by inflation. Don’t miss our best inflation-beating savings accounts guide.

When deciding where to put your money, consider whether you will need to pay tax on the savings interest. There are various allowances so you can earn some interest before you have to pay tax on it – such as the personal allowance, if you haven't already used that on other income, and the starting rate for savings. You won't qualify for the latter if your other income is 17,570 or more.

Basic and higher rate taxpayers get a personal savings allowance. This means you can earn £1,000 in savings interest tax-free if you're a basic rate taxpayer, or £500 if you're in the higher tax band. Tax on savings interest is currently applied at your marginal tax rate – eg 20% for basic rate taxpayers. However, the tax rate for savings income will rise by two percentage points from April 2027.

You can shield your savings from the taxman by putting it in a cash ISA. You can put up to £20,000 into ISAs each tax year – although under 65s will be limited to putting no more than £12,000 into cash ISAs from 6 April 2027.

Read more: How to shield savings from tax if you’ve used up your ISA allowance

It's recommended that you have some cash in easy to access savings, in case of an emergency. The amount will depend on your age and personal circumstances but, for working people, the general rule of thumb is to have enough to cover three to six months of essential spending. Once you have an emergency savings pot, you might want to consider investing some of your savings.

What do falling interest rates mean for mortgages?

A fall in base rate is usually mirrored in mortgage rates, as base rate is the rate charged by the Bank of England (BoE) to smaller banks and building societies to borrow money. It is also the rate of interest the BoE pays to commercial banks, building societies and financial institutions that hold money with it.

When you will see a change in your mortgage rate is dependent on the type you’ve taken out.

Tracker mortgages are directly pegged to the base rate so any change is likely to happen quickest.

Those on standard variable rates may be the next to see a change. That said, you might not see much change as lenders are not obliged to pass on any base rate cut to those with an SVR.

Following the announcement of today's base rate cut, Nationwide Building Society said it will lower the rate on its Standard Mortgage Rate (SMR), its SVR-equivalent, from 6.74% to 6.49% on 1 January.

Those on a fixed-rate mortgage won’t see a change until their deal comes to an end.

David Hollingworth, associate director at mortgage broker L&C Mortgages, said it could be worth opting for a tracker mortgage over the longer term, with interest rates forecast to fall further in 2026.

“Tracker rates have been gradually closing the gap on fixed rate options but are still behind the best of the fixes. However, with more base rate cuts expected next year we will potentially see more borrowers wondering if following rates down could make for a better option in the longer run,” Hollingworth said.

Beat low rates on savings

While interest rate cuts are great for borrowers, for savers it means your money may have to work harder to beat inflation.

While there are some savings accounts that beat inflation (for now), over the long term, you face the risk of inflation eroding the value of your cash – this basically means your money will be worth less in years to come.

To keep up, investing is the key. You will have heard a lot recently about investing. As interest rates on savings come down, and they will, now is the time to turn to investing to really grow your savings and build financial resilience against future rate cuts, which are expected in 2026.

If you put £1,000 into savings today and then paid in £100 a month over 10 years, you will have £13,000 and it would be worth £15,358 with interest at 3% a year – that’s £2,358 interest.

Invest the same, you could end up with £20,287, earning £7,287 interest, with an estimated 8% annual return (it could be higher but also lower), Hargreaves Lansdown's calculator shows.

Better yet, stick it in stocks and shares ISA to shield it from the taxman.

See our guide on how to start investing for more.

Deutsche Bank: three things today’s UK interest rates decision tells us

Sanjay Raja, chief UK economist at Deutsche Bank, draws three key takeaways from today’s MPC meeting.

“First, as has been a long-standing theme for the BoE, divisions within the MPC remain. The December decision came with another split vote with five members voting for a quarter-point rate cut, and four opting to hold Bank Rate at 4%,” Raja said.

“Second, Bank Rate is inching its way towards a more 'neutral' policy setting. And the scope for more rate cuts is limited, with the Bank sending its more explicit message yet on the path for policy: ‘judgements around further policy easing will become a closer call’.

“Third, the trade-off between a deteriorating labour market and falling inflation will complicate the MPC's path ahead. Despite a subtle push to shift away from a quarterly pace of rate cuts, many on the committee continue to put more weight on downside risks to activity (and the labour market).”

When is the MPC’s next base rate announcement?

The MPC’s next base rate decision will be confirmed on 5 February – the first announcement of eight in 2026.

And with that, we’re leaving you for today. Thanks for following our live coverage, but keep a watch on the MoneyWeek site for future updates on what today’s decision means for your finances.

UK inflation: Summary

• The Office for National Statistics (ONS) releases the latest UK inflation data today (17 December).
• The Consumer Prices Index (CPI) rose 3.2% in the 12 months to November, below the Bank of England's expected 3.4%. Some analysts had forecast a reading as high as 3.6%.
• CPI fell by 0.2% between October and November.
• A slowdown in food, alcohol and tobacco prices was the biggest disinflationary driver.
• Last month, data showed that CPI rose 3.6% in the 12 months to October, down from 3.8% in the previous three months.
• The UK’s current inflationary cycle is expected to have already peaked for 2025.
• The Office for Budget Responsibility (OBR) expects inflation to fall to 2.5% in 2026, and to the Bank of England’s target 2% rate the following year..

| What is inflation? | CPI versus RPI inflation | Upcoming CPI release dates |

Good afternoon, and welcome to our live coverage ahead of tomorrow’s UK inflation data release.

The final week before Christmas is a big one for UK macroeconomic news. Today saw the release of labour market figures showing that UK unemployment rose to 5.1% in the three months to October, while tomorrow we have the ONS’s inflation data release.

Both those releases will be front and centre when the Bank of England’s Monetary Policy Committee (MPC) meets on Thursday. A weakening economy will strengthen calls for an interest rate cut, but tomorrow’s inflation data could pose a head-scratcher for the committee if the CPI figure remains elevated.

Follow our preview and reaction coverage of the latest UK inflation data release in this live report. MoneyWeek will also be reporting on the MPC meeting later in the week.

When is UK inflation data announced?

The ONS will release the latest UK inflation data tomorrow (17 December) at 7am.

We’ll bring you live coverage of the release as it happens as well as reaction and analysis afterwards.

What is CPI?

The Consumer Prices Index (CPI) is the headline measure of inflation that is used by the ONS and policymakers to measure the pace of price increases.

CPI is calculated based on annual changes in prices of a basket of goods that reflect broad consumption patterns in the economy. The MPC targets an annual rate of CPI inflation of 2%, which is viewed by most economists as a healthy level of inflation.

While too much inflation is bad, as it can make goods unaffordable for much of the population, too little is also viewed as economically unhealthy. If inflation turns negative (so prices are falling across the economy), it is called deflation, and it can be very damaging economically.

Most countries use CPI as the headline measure of inflation, but there are other means of measuring it.

For example, the Retail Prices Index (RPI) includes measures that are related to home ownership.

We explain the difference between CPI versus RPI inflation in a separate piece.

What are the expectations for UK inflation?

According to last month’s Monetary Policy Committee report, the Bank of England expects inflation to have fallen by 0.2 percentage points to 3.4% in the 12 months to November.

Not all economists agree. Andrew Goodwin, chief UK economist at economic advisory firm Oxford Economics, predicts an inflation read of 3.6%. Robert Wood, chief UK economist at research firm Pantheon Macroeconomics, expects the read to come in at 3.5%.

“We expect year-over-year airfares inflation to surge to 12.3% in November from 0.9% in October, as a large fall in ticket prices last November drops out of the annual comparison,” said Wood.

Bank of England projections see CPI inflation averaging 3.5% in the fourth quarter of 2025, before falling to 3.1% in the first quarter of 2026.

Charting UK inflation

UK inflation was trending downwards following a peak in October 2022.

That trend has reversed this year, largely thanks to the impact of last year’s Autumn Budget which contained several inflationary measures like an increase to the minimum wage.

September was expected to mark the high point of the latest bout of inflation, at 4%. As it happened, the month marked the end of a three month plateau at 3.8%, before inflation fell to 3.6% in October.

Will we see another dip when the ONS figures are released tomorrow, or is UK inflation set to plateau again?

Inflation data unlikely to comfort households at Christmas

Expectations for tomorrow’s inflation read range between 3.4-3.6%. But households are likely still feeling the squeeze, according to Tamsin Powell, consumer finance expert at Creditspring.

“While prices may not be rising as quickly as they have done previously, they are still rising faster than wages for many,” she said. “The prolonged period at this level continues to squeeze already stretched budgets.”

Powell added that the timing of the final read of the year is “particularly difficult as families head into the festive period, when spending on food, travel and socialising typically rises”.

However, the longer term picture is more upbeat.

“Inflation is widely expected to move onto a clearer downward path in 2026, supported by easing energy costs and continued government measures such as the fuel duty freeze,” said Powell.

Thanks for following live coverage ahead of tomorrow's UK inflation data. That concludes coverage for today, but join us first thing tomorrow morning for live coverage of the release as it happens.

Good morning, and welcome back to live coverage of today's UK inflation data release. We're just a few minutes away from the ONS announcing November's inflation figures. Stay with us for live coverage and rolling reaction and analysis.

BREAKING: UK INFLATION FELL TO 3.2% IN NOVEMBER

Food and alcohol bring UK inflation below expectations

A slowdown in alcohol and food inflation seems to have been the main driver behind this unexpectedly low inflation reading.

More analysis and reaction to follow.

UK Inflation at its lowest level since March

That reading of 3.2% is the lowest CPI reading since March (2.6%), which preceded a jump to 3.5% in April as some of the more inflationary measures from chancellor Rachel Reeves’s first Autumn Budget took effect.

Lower food, alcohol and tobacco inflation seem to have driven the drop.

“Lower food prices, which traditionally rise at this time of the year, were the main driver of the fall with decreases seen, particularly for cakes, biscuits, and breakfast cereals,” said Grant Fitzner, chief economist at the ONS.

“Tobacco prices also helped pull the rate down, with prices easing slightly this month after a large rise a year ago. The fall in the price of women’s clothing was another downward driver.”

While the cost of raw materials for businesses rose, there was a slowdown in the increase of the cost of goods leaving factories.

Services remain the main driver of inflation

Looking more closely at today’s UK inflation figures, services inflation, which has remained sticky throughout the current inflationary cycle, is still the biggest driver of inflation.

In the 12 months to November, services CPI rose 4.4%. Goods CPI ran at 2.1% in that period – only fractionally above the Bank of England’s target rate for all CPI.

On a monthly basis, CPI fell by 0.2% in November.

Reeves responds to inflation report

Chancellor Rachel Reeves has responded to this morning’s inflation report, saying that families across the country that are concerned about their bills will welcome the fall.

“Getting bills down is my top priority. That is why I froze rail fares and prescription fees and cut £150 off average energy bills at the Budget this year,” said Reeves. “The Bank of England agree this will help cut prices and expect inflation to fall faster next year as a result.”

Lower-than-expected inflation increases the chance of an interest rate cut

The Bank of England’s Monetary Policy Committee (MPC) meets tomorrow, and today’s unexpectedly low inflation read combined with recent weak economic data ramps up the likelihood that the Bank will deliver an interest rate cut at its final meeting of the year.

“Today’s news is a bright spot for the Bank of England, government and consumers alike,” said Isaac Stell, investment manager at Wealth Club – though he cautioned that there is still a way to go before headline inflation rates return to the Bank’s 2% target.

“Looking ahead, barring any surprise change of heart, markets expect the Bank of England to press ahead with one final cut for the year to the base rate,” said Scott Gardner, investment strategist at J.P. Morgan Personal Investing.

Beyond CPI: more November inflation metrics

As we have mentioned earlier, CPI – while the headline rate that is most closely-watched by policymakers – is not the only measure of inflation.

Nor is it the most comprehensive: that mantle goes to the Consumer Prices Index including owner occupiers' housing costs (CPIH). UK CPIH rose 3.5% in the 12 months to November, down from 3.8% in the 12 months to October.

Core CPI and core CPIH are versions of each of these indices that remove more volatile categories such as food, alcohol, energy and tobacco.

Core CPI rose 3.2% in the 12 months to November, down from 3.4% the previous month, while core CPIH rose by 3.5% – down from 3.7% in October.

^{Source: Office for National Statistics}

Food and drink dragged UK inflation downwards

Here’s a closer look at how the different categories impacted CPI in the 12 months to November:

Food and non-alcoholic beverages as well as alcohol and tobacco were the two most disinflationary categories, both taking 0.07% off annual CPI inflation.

Clothing and footwear followed with an annual impact of -0.06%.

Communication added 0.01% to annual CPI inflation.

Recap: UK CPI inflation fell to 3.2% in November

Here’s a recap on the UK inflation headlines today:

• Headline UK inflation as measured CPI rose by 3.2% in the 12 months to November.
• The Bank of England had forecast a rise of 3.4%, while some economists expected an inflation rate of 3.6%.
• Food and non-alcoholic beverages as well as alcohol and tobacco were the two most disinflationary categories.
• CPI fell by 0.2% on a monthly basis.
• CPIH rose 3.5% in the 12 months to November, down from 3.8% in the 12 months to October. Core CPI rose 3.2%, down from 3.4%, while core CPIH rose 3.5%, down from 3.7%.

Services inflation still a concern

Looking at goods alone, CPI ran barely above the Bank of England’s target rate in the 12 months to November.

It is the services sector that is keeping UK inflation elevated.

“Service sector inflation will certainly be an area of concern, with the cost of eating and staying out elevated as businesses attempt to deal with last year’s Budget measures which increased labour costs,” said Danni Hewson, head of financial analysis at AJ Bell.

Hewson cautions that falling inflation doesn’t mean the cost of living is getting cheaper – inflation measures the pace of price increases, and 3.2% is still well above the target level.

“But the bigger than expected fall in headline CPI is good news and will help boost people’s spending power and confidence,” she added. “With so much of the UK economy reliant on household spend, it could also signal better news for the UK’s flatlining growth.”

UK inflation is trending down

November’s headline inflation figure, with CPI rising 3.2% annually, is the lowest the measure has stood since March this year.

It continues a welcome trend of falling inflation, with the period from July to September when CPI rose 3.8% for three consecutive months marking the peak of the current inflationary cycle.

Based on data from the MPC’s last meeting in November, Bank of England staff expect UK inflation to average 3.5% in Q4 before falling to 3.1% in Q1 2026 and 2.9% in Q2.

Moneyfacts: savings are being hit by inflation

We’ve had a slightly unusual combination of falling interest rates alongside elevated inflation this year.

That’s bad news for savers, who see their returns squeezed in nominal terms by falling rates, and in real terms by inflation eroding their buying power.

“This year inflation has averaged 4.01% and the Moneyfacts Average Savings Rate at 3.50%, meaning cash savings have failed to keep pace,” said Caitlyn Eastell, spokesperson at Moneyfacts.

“For someone with £10,000, this equates to being around £50 worse off in real terms.”

Eastell recommends that savers shop around for the best deals to ensure that their money is working as hard as possible for them.

Alternatively, savers could consider starting to invest some of their money in a stocks and shares ISA. Historically, stock market trackers have tended to outperform cash savings and generate inflation-beating returns.

Research from Fidelity International found that £20,000 saved into a cash ISA on 6 April 2017 would have been worth £23,549 by October 2025. But to keep up with inflation over that period, it would have needed to grow to £27,000.

The same amount invested into a global tracker fund in a stocks and shares ISA would have grown to £50,700, according to the analysis.

Are we nearing an end to the inflationary cycle?

Aside from September 2024, when annual CPI inflation briefly dipped to 1.7%, inflation has been running above the Bank of England’s 2% target rate ever since July 2021.

But with inflation having fallen by more than expected in the year to November, is the end of the current inflationary cycle now in sight?

“After a prolonged period of elevated inflation, the latest figures suggest the economy is entering the final stretch towards more normal levels,” said Charlotte Kennedy, chartered financial planner at Rathbones. “Measures announced at the Budget – such as freezing rail fares until 2027, cutting fuel duty, and reducing energy bill costs – are expected to shave around 0.5 percentage points off headline inflation by the middle of next year.”

However, Kennedy cautioned that we are not out of the woods yet.

“It remains important to recognise that each of us experiences a personal inflation rate based on our individual spending habits. Making the necessary adjustments is key to maintaining financial resilience - especially during the festive period, which is often characterised by excessive spending.”

What the latest UK inflation data means for interest rates

A 25 basis point cut to interest rates had been widely expected for the Monetary Policy Committee’s (MPC) meeting tomorrow, even before the surprisingly large drop in CPI inflation.

The inflation surprise “de facto locks in” the cut, according to Kallum Pickering, chief economist at investment bank Peel Hunt.

Pickering also observed that the likelihood of a successive rate cut in the first quarter of next year has increased off the back of today’s data.

“The danger now is that the BoE keeps its policy too tight for too long,” he said. “No growth since summer, a rapid cooling of the labour market, elevated household saving and a sluggish housing market are all obvious signs of tight money.

“These data are hard to square with the lingering hawkishness at the BoE,” he added.

Tell us your thoughts – where is UK inflation going?

Today’s UK inflation read marked a surprisingly large drop in UK inflation. Where do you think inflation will go between now and the end of next year?

UK inflation recap

As a reminder, the headline CPI inflation figure fell from 3.6% in the year to October to 3.2% in the year to November. That’s a much steeper drop than had been expected, though it still leaves UK inflation well above the Bank of England’s target 2% rate.

The big question now is whether this will prompt the MPC to cut interest rates when it meets tomorrow.

We're going to end our inflation coverage here in the meantime. Thank you for following, and visit our interest rates report for more analysis of how today's inflation data could impact UK interest rates.

Summary

• Chancellor Rachel Reeves delivered her Autumn Budget speech in the House of Commons on Wednesday, 26 November
• The OBR’s forecast was accidentally leaked in a “technical error” prior to the Budget’s announcement, which Reeves said was “deeply disappointing”
• A range of tax hikes were announced as Reeves attempts to balance the books
• The chancellor cut the cash ISA limit from £20,000 to £12,000 per year for under 65s, from April 2027
• She also confirmed a £2,000 cap on National Insurance contributions relief for pension contributions made through salary sacrifice

What was announced in the Autumn Budget? | Autumn Budget winners and losers

Good afternoon and welcome to MoneyWeek’s Autumn Budget live report. Chancellor Rachel Reeves is due to announce her 2025 Autumn Budget at lunchtime tomorrow, Wednesday 26 November. We will be covering the announcements as they happen, as well as bringing you reaction and analysis.

What has Rachel Reeves said about the Budget – and what could be announced?

Chancellor Rachel Reeves gave a rare pre-Budget speech on 4 November, during which she pledged to cut NHS waiting lists, cut the national debt and cut the cost of living.

She promised a Budget “for growth with fairness at its heart… and a Budget that supports businesses – to create jobs and to innovate”.

However, it’s widely expected that a slew of tax hikes will be announced tomorrow.

In the 2024 Labour Party manifesto, the party promised not to raise National Insurance, the basic, higher, or additional rates of income tax, or VAT, so the chancellor will likely need to look elsewhere.

This could mean extending the ongoing freeze on income tax thresholds, from 2028 to 2030.

Another way the chancellor could boost Treasury coffers is a clampdown on salary sacrifice, or targeting dividend tax or capital gains tax.

There could also be a shake-up to property taxes, inheritance tax, and/or business taxes.

It was rumoured Reeves was considering raising income tax rates by 2p, and cutting National Insurance by the same amount, in a move which could raise £6 billion, according to think tank the Resolution Foundation.

However, the chancellor has reportedly since backed away from this idea.

Read more on potential tax hikes in our guide.

What time is the Autumn Budget?

Rachel Reeves will deliver the Autumn Budget in the House of Commons on Wednesday (26 November) at around 12:30pm, after Prime Minister’s Questions.

Most budget speeches usually last around an hour, but they could be shorter or longer depending on the content. It took Reeves roughly 80 minutes to deliver her first Budget in 2024.

Once Reeves finishes speaking, the shadow chancellor, currently Conservative MP Mel Stride, is expected to give a rebuttal that will last around 20 minutes. The debate then begins in earnest, likely dominating House business for the week ahead.

Daniel Hilton, junior writer

Will the cash ISA limit be cut?

Reeves is set to cut the annual cash ISA limit to £12,000 in the Autumn Budget, the Financial Times reports.

There is currently an overall £20,000 annual allowance for ISAs – this can be split across different types of ISA. For example, you could put £5,000 into a cash ISA and £15,000 into a stocks and shares ISA in a tax year, or you could use the whole annual allowance by putting £20,000 into a cash ISA if you wanted.

It's been suggested such a move could incentivise savers to put their money into a stocks and shares ISA instead, potentially boosting the British stock market.

In March, Reeves said she was seeking to “get the balance right between cash and equities to earn better returns for savers” and “boost the culture of retail investment” in the UK.

However, critics warn against the idea. The Building Societies Association, which represents 43 UK building societies and six credit unions, said building societies use cash ISA deposits to fund mortgages, so cutting the limit could make lending more expensive.

Meanwhile, Dame Meg Hillier, chair of the Treasury Select Committee, said now isn’t the right time to cut the cash ISA allowance. She added: “Instead, the Treasury should focus on ensuring that people are equipped with the necessary information and confidence to make informed investment decisions.”

What would a cash ISA allowance cut mean for savers?

The average amount saved into a cash ISA in 2023/24 was less than £7,000 per person, HMRC figures show, suggesting a £12,000 limit might not have a dramatic impact on most people.

However, it does "risk sending a confusing message to savers", says Adam French, head of news at Moneyfactscompare.co.uk.

“For many families, young professionals and pensioners, the full £20,000 allowance may be out of reach, but the principle that they can build a risk-free cash buffer against a volatile world without worrying about future tax changes still matters.”

The ongoing freeze on income tax thresholds mean more Britons face being dragged into higher tax bands. Combined with higher interest rates, savers will find more of their savings interest becomes liable for income tax, making the tax-free ISA wrapper increasingly important.

“Taken together, this feels less like a coherent plan to boost long-term investment and more like a quiet raid on those who are trying to do the right thing,” French said.

“By leaning on frozen thresholds and a lower cash ISA limit, the government is quietly raising revenue off the back of diligent savers, when it should be encouraging responsible financial decisions and a healthier savings and investment culture.”

Read more: 'I've used my annual ISA allowance. How can I shield my savings from tax?'

The best and worst case scenarios for the financial markets

What’s the best and worst we can realistically hope for in the Budget, and how might the markets respond?

“Arguably the best case scenario for financial markets would be the unveiling of more rosier than expected projections for both UK growth and productivity, and a smaller fiscal gap than previously feared,” says Matthew Ryan, head of market strategy at global financial services firm Ebury.

That would reduce the size of the fiscal deficit, enabling Reeves to maintain credibility by plugging it with narrower, more targeted tax hikes and avoiding the need to breach any of its manifesto pledges.

But the chances of things panning out this way don’t seem strong.

“We are bracing for some curveballs,” says Ryan. “Investors will be on high alert for any unexpected tax increases, and the risk of both higher borrowing forecasts and further above-inflation spending hikes.”

A tax-heavy Budget could see sterling sell off, and given the anticipated negative impact on growth, could lead to faster rate cuts from the Bank of England.

“A more growth friendly budget would have the opposite effect, as easing bets in favour of MPC cuts would amplify upside in the pound,” says Ryan.

Dan McEvoy, senior writer

Help to Save scheme set to be expanded

The chancellor is expected to make the Help to Save scheme permanent from 2028. It had been due to end in 2027.

It is also set to be opened up to parents and carers on Universal Credit from 2028.

Help to Save offers a 50% boost on savings in the scheme – giving eligible savers a potential government bonus of £1,200 over four years.

Soft drink levy extended

The soft drinks industry levy will be expanded to include sugary milk-based drinks, Health Secretary Wes Streeting announced today.

The changes will affect pre-packaged milk-based and milk-alternative drinks with added sugar, such as supermarket milkshakes, flavoured milks, sweetened yoghurt drinks, chocolate milk drinks, and ready-to-drink coffees.

This does not include plain, unsweetened milk and milk-alternative drinks.

The government will also reduce the threshold from 5 grams to 4.5 grams of sugar per 100ml.

Businesses will have until 1 January 2028 to reduce sugar in their drinks, or face the levy.

Health and Social Care Secretary Wes Streeting said: "The levy has already shown that when industry cuts sugar levels, children’s health improves. So, we’re going further.

“A healthier nation will mean less pressure on our NHS, a healthier economy, and a happier society.”

The government expects the changes to raise £40 million to £45 million per year in extra tax receipts, once introduced on 1 January 2028.

What do we know about the Budget so far?

While a lot is still under wraps, the Treasury has confirmed a number of policies in recent days.

Reeves is extending the freeze on NHS prescription charges next year, saving patients in England around £12 million, the government said.

A single prescription will remain at £9.90 and three-month and annual prescriptions prepayment certificates will also be held at the current level for 2026/27.

On Sunday, the Treasury announced all regulated rail fares would be frozen next year, for the first time in 30 years.

The chancellor is also set to confirm the state pension will rise by 4.8% during tomorrow’s speech, affecting 13 million pensioners.

Find out what we know so far about Rachel Reeves’s 2025 Autumn Budget in our guide.

National Living Wage and National Minimum Wage to rise

Chancellor Rachel Reeves has unveiled another sweetener this evening ahead of the Autumn Budget by announcing an increase to the National Living Wage (NLW) and also the National Minimum Wage (NMW).

From 1 April 2026, the NLW will rise by 4.1% to £12.71 per hour for eligible workers aged 21 and over.

This will increase the gross annual earnings of a full-time worker on the NLW by £900, benefiting around 2.4 million low-paid workers, the Treasury said.

The NMW rate for 18 to 20-year-olds will also increase by 8.5% to £10.85 per hour.

This will mean an annual earnings increase of £1,500 for a full-time worker, and marks further progress towards the government’s goal of phasing out 18-20 wage bands and establishing a single adult rate.

The NMW for 16 to 17-year-olds and those on apprenticeships will increase by 6% to £8 per hour.

It is good news for employees but employers may worry about the extra costs after already being hit with National Insurance hikes in the previous Budget.

The benefits of the pay rise may also be offset though by other rumoured policies such as a clampdown on salary sacrifice for pension contributions and an extension of frozen income tax thresholds, putting more people at risk of fiscal drag.

Marc Shoffman, contributing editor

MoneyWeek’s Budget wishlist

That’s all from us this evening – we will be back tomorrow morning for live coverage of Budget Day.

Before we sign off, the MoneyWeek team has shared what they’d like to see in the Budget.

Thank you for joining us for our 2025 Autumn Budget preview. Please join us again tomorrow morning as we prepare to hear what the chancellor will announce.

How do you feel about the Autumn Budget?

Good morning and happy Autumn Budget Day! There are just hours to go until Rachel Reeves delivers her speech in the House of Commons. Tax rises and/or spending cuts are almost certainly on the cards, but it remains to be seen just what the chancellor will announce.

We want to hear from you – how are you feeling about today’s Budget? Vote in our poll below.

What will be in the 2025 Autumn Budget?

Reeves will deliver the Budget speech today at around 12.30pm, after Prime Minister’s Questions.

Some details have already been announced – such as an increase to the national living wage and national minimum wage next year, and an extension of the freeze to NHS prescription charges.

Reeves: 'Britain won’t return to austerity’

Ahead of her Budget speech today, the chancellor has said she will take "the fair and necessary choices" to deliver on the Government’s mandate for change.

In a video, Reeves said: “I’m not going to return Britain back to austerity. Nor will I lose control of public spending, more reckless borrowing.”

She added: “I will take action to help families with the cost of living…cut hospital waiting lists…cut the national debt."

Farmers protesting in Westminster ahead of Autumn Budget

Tractors are assembling outside the Houses of Parliament this morning ahead of the Autumn Budget, in protest against a move that Reeves brought in last year to remove inheritance tax relief above £1 million for farms and rural businesses.

“Whilst much of the focus has been on the anticipated new policies being announced today, tractors in Downing Street again this morning illustrate the impact that is still being felt in rural communities around the changes announced last year to Agricultural Property Relief,” said Hannah Wallbridge, senior associate at regional law firm Gardner Leader.

The changes, which critics argue will force the breakup of smaller, family-owned farms, will take effect in April 2026.

“Unless further changes are announced today, the clock continues to run for those farming families to seek estate planning advice,” said Wallbridge.

Dan McEvoy, senior writer

Could we see exemptions to stamp duty on shares in the Autumn Budget?

One of Reeves’s many headaches in the Autumn Budget today is finding a way to reinvigorate London’s long-suffering stock market.

The London Stock Exchange (LSE) has seen some of the UK’s biggest companies, such as AstraZeneca and Wise, seek new listings overseas this year. There is a not-unjustified perception that UK-listed companies suffer from low valuations, especially in comparison to US-listed counterparts.

Yesterday, Bloomberg reported that Reeves is considering a stamp duty holiday for companies that list on the LSE. If it comes about, it would see companies exempted from the 0.5% stamp duty tax that currently applies to UK-listed shares for three years after their IPO.

“If this Budget rumour proves accurate, it may be the carrot British businesses need to plump for a domestic listing,” said Emma Wall, chief investment strategist at Hargreaves Lansdown.

Reeves is also expected to announce other measures aimed at encouraging Brits to start investing, including a potential cut to the annual cash ISA allowance in order to encourage investments into stocks and shares ISA.

Dan McEvoy, senior writer

When were the longest and the shortest Budget speeches?

Sitting through upwards of an hour of dense talk on the public finances can be somewhat of a slog, even for the most passionate among us.

Spare a thought, then, for some of Parliament’s honourable Victorian members who listened to the longest uninterrupted Budget speech in history in 1853.

The marathon address was given by then chancellor William Ewart Gladstone, who spoke for around four hours and 45 minutes. Such lengthy speeches were characteristic of the four-time Liberal prime minister – he was notable for often giving speeches of up to five hours without a break when he campaigned in Midlothian.

Gladstone’s opposite in almost every sense was the Conservative politician Benjamin Disraeli, Gladstone’s political arch-rival with whom he traded the premiership of the UK across decades.

It is perhaps fitting that Disraeli holds the opposite Budget record, delivering the shortest Budget in history in 1867, lasting just 45 minutes.

That is not to say that Disraeli was not susceptible to speaking at length. When including Budgets with interruptions, Disraeli holds the record for the longest speech, lasting five hours, though this included a break.

Daniel Hilton, junior writer

The lost art of a budgetary tipple

Drinking on the job is probably not allowed in your workplace and, despite the many bars nestled within the Palace of Westminster, is usually forbidden in the House of Commons for politicians – that is, apart from in one circumstance.

The chancellor is the only politician permitted to drink alcohol in the chamber, according to parliamentary tradition, and can only do so when delivering the Budget.

Previous chancellors have made the most of this. William Ewart Gladstone, who first became chancellor in 1852 and later became the prime minister, drank a bizarre mixture of sherry and beaten egg, while his opposite number, Conservative politician Benjamin Disraeli, drank brandy and water.

It is not just chancellors far in the past who embraced the tradition. More recent examples include Geoffrey Howe (gin and tonic), Nigel Lawson (spritzer), Hugh Gaitskell (rum and orange), Hugh Dalton (rum and milk), Winston Churchill (brandy), and Kenneth Clarke (whisky).

These days, the tradition seems to be dead. Every chancellor since Gordon Brown has had plain water while delivering the budget.

Daniel Hilton, junior writer

Balancing the books in the Autumn Budget

The Autumn Budget is, first and foremost, an exercise in balancing the national books. Rachel Reeves has an added challenge on this front as, during last year’s election campaign, the Labour party pledged to not raise any of the “big three” taxes on working people (income tax, (employees’) national insurance and VAT).

Labour’s fiscal rules also commit the government to fund day-to-day spending entirely through revenue as opposed to borrowing by the 2029/30 tax year.

“Chancellor Reeves will want to show a materially higher fiscal consolidation in the Autumn Budget of close to £30 billion, likely extending the headroom against the fiscal rules closer to £15 billion,” said Reto Cueni, chief economist at private bank Syz Group.

Achieving this will require tax increases, and Reeves will likely target ‘non-inflationary’ areas such as tax threshold freezes or reducing capital gains tax exemptions.

“Further tax hikes are a foregone conclusion. Some, including another freeze to the income tax thresholds, are as good as fully priced in by markets,” said Matthew Ryan, head of market strategy at Ebury.

“It will be key for the government to show that over the next two years the budget deficit will be reduced and the UK’s debt burden will finally move down,” said Cueni. “By reducing the fiscal deficit over the next two years, the government can regain fiscal credibility and assure investors that the UK’s government is keeping control of the debt situation.

“This would relax tensions in the gilts market and let yields grind lower,” Cueni added.

Dan McEvoy, senior writer

Reeves leaves Downing Street

Chancellor Rachel Reeves has left Number 11 Downing Street to deliver the 2025 Autumn Budget. She will make the long-awaited speech at around 12.30pm in the House of Commons, after Prime Minister's Questions.

FTSE 100 on the rise ahead of Autumn Budget

Not many people are feeling happy about the Autumn Budget, as speculation over tax rises continue to heat up.

But for the FTSE 100 and bonds market, it’s been more of a joyous morning as stocks and bonds rise with the budget set to draw a line under months of speculation and uncertainty for businesses.

Ten-year UK gilt yields – in effect, the return the government promises to pay buyers of its debt – opened higher this morning at around 4.52%, but have since fallen back to around 4.5%. Bond yields move in the opposite direction to prices.

The FTSE also opened 10.09 points (0.1%) higher at 9,619.62.

The chancellor has been drip feeding some of her policies all week, in particular around the costs of living measures.

But with mounting pressures to reduce debt, some of the hard hitting measures are most likely to be announced this afternoon. Brace!

Kalpana Fitzpatrick, editor

Will the two-child benefit cap be lifted?

The chancellor could look at lifting the two-child benefit cap today – a move which charities say would lift hundreds of thousands of children out of poverty.

The cap limits the extra amount of Universal Credit families can receive to two children and was introduced by the Conservative government in the 2015 Budget.

Households on Universal Credit with a third or more children born from 6 April 2017 do not receive extra amounts under the cap.

There are exceptions to the two-child limit, for example for parents that have had multiple births, like twins or triplets.

Sam Walker, writer

What economic circumstances is Rachel Reeves contending with?

It is no secret that today’s budget will be delivered under some difficult economic circumstances.

The UK economy grew by a paltry 0.1% in the three months to September, the latest official data shows, including a month-on-month contraction of -0.1% in September.

At the same time, unemployment is at the highest level since 2021, climbing to 5% in September. Inflation has also remained much higher than the 2% target, for most of the year. The latest figures show price growth was 3.6% in the year to October.

Amid these dreary figures, the chancellor reportedly faces a £22 billion black hole in the public finances, according to estimates by the Institute for Fiscal Studies (IFS), an influential think tank.

It means the chancellor must find an extra £22 billion just to stick to previous commitments for government spending, while keeping her fiscal headroom at £10 billion.

As the chancellor’s rules stop her from increasing borrowing to meet day-to-day government spending, this budget shortfall will need to be filled by either cutting expenditure or raising taxes.

Daniel Hilton, junior writer

BREAKING: OBR forecast released early

The Office for Budget Responsibility has reportedly published its forecast early. Usually, the forecast is released after the Budget is announced.

There is speculation that the apparent early release may have been an accident. More news to follow.

What are the chancellor’s fiscal rules?

You may hear a lot of references to ‘fiscal rules’ in the chancellor’s speech and the surrounding commentary today.

These are a set of three principles governing the public finances that Rachel Reeves has committed to sticking to as a way to keep the trust of the markets and the public.

They are entirely self-imposed, but the Office for Budget Responsibility (OBR), the UK’s official budget watchdog, calculates whether the government will meet them or not.

Rule 1: “The current budget should be on course to be in balance or surplus by 2029/30” (‘stability rule’).

This rule requires the government to ensure that the day-to-day costs of running the country are met by revenues by the 2029/30 tax year, the final one of the current parliament.

The rule was tweaked in 2024 to mean that borrowing is allowed for the purposes of investment, but still means that day-to-day spending (like of running the NHS) cannot be funded through borrowing.

Rule 2. “Net financial debt should fall as a share of the economy in 2029/30” (‘investment rule’)

This rule requires public debt to be forecast by the OBR to be lower in 2029/30 than 2028/29 in terms of GDP.

Public debt is defined as public sector net financial liabilities, or ‘net financial debt’.

Rule 3. “Some types of welfare spending must remain below a pre-specified level” (the ‘welfare cap’)

This rule adds constraints on roughly half of government welfare spending. It requires total annual welfare spending in this parliament to be at a maximum level of £194.5 billion by 2029/30.

The margin for overspend is 5%. Pension payments and welfare that are ‘most sensitive to the economic cycle’ (like Jobseekers’ Allowance) are excluded from the cap.

Daniel Hilton, junior writer

Prime Minister’s Questions is underway in the House of Commons. Prime minister Keir Starmer will answer questions from MPs for around half an hour. Chancellor Rachel Reeves should then take to the dispatch box soon after, to deliver the 2025 Autumn Budget speech.

Kemi Badenoch, the leader of the opposition, is expected to deliver her response immediately afterwards.

Mansion tax to be introduced on £2 million homes

The Office for Budget Responsibility appears to have confirmed plans for a mansion tax on homes worth £2 million and above.

The plans are set to be revealed by chancellor Rachel Reeves but seem to have been confirmed by BBC News, which has reportedly obtained an early copy of the OBR forecasts when it was published in error.

There was speculation about the new levy in the build-up to the Budget, which is effectively a wealth tax.

But critics will likely label it a levy on London and the South East, where most £2 million homes are situated.

A mansion tax could also cause a freeze at the top-end of the property market. Rightmove data shows sales agreed for £2 million-plus homes are already down 13% year-on-year.

Marc Shoffman, contributing editor

Reeves extends ‘stealth tax’ until 2030, breaking previous commitment

The freeze on income tax thresholds has been extended until 2030, according to the BBC. The organisation has reportedly obtained an early copy of the OBR’s budget report seemingly in error.

MoneyWeek has approached the OBR for confirmation that the forecast has been leaked early, and apparently by accident. As yet, we have not received a reply.

New tax to be levied on electric vehicle drivers

Electric vehicle (EV) drivers are set to pay a new tax for each mile they drive, according to the OBR’s leaked report, as reported by the BBC.

The complete details have not yet been confirmed, but the report says the new mileage-based charge will be “around half the fuel duty rate paid by drivers of petrol cars (raising £1.4 billion)".

Drivers of petrol and diesel vehicles have to pay fuel duty when they fill up, charged at around 53p per litre. The new EV tax is designed to bring their taxation closer in line with typical vehicles.

Household energy bills to be cut

Households gas and electricity costs will be lowered through cuts to green levies on energy bills, the BBC reports.

It will cost around £2.3 billion, according to the OBR.

Two-child benefit cap lifted

The two-child benefit cap, which limits the amount of Universal Credit families can receive, will be lifted, according to the BBC. The OBR has reportedly estimated this will cost £3 billion by 2029/30.

Estimates from the Child Poverty Action Group have suggested lifting the cap would lift 350,000 children out of poverty and mean 700,000 are in less deep poverty.

Government fiscal headroom will grow to £22 billion

The early release of the OBR’s report suggests the chancellor will increase the government’s ‘fiscal headroom’ to £22 billion, up from its current level of £10 billion, the BBC reports.

OBR: Inflation to be higher than expected in 2025 and 2026.

Inflation is set to be 3.5% in 2025, according to the BBC, based on the OBR’s early leaked report.

The new forecast is higher than their previous expectation of 3.2%, which the OBR made in March.

Inflation is also expected to be higher in 2026, reaching a level of 2.5% according to the OBR. This is above their previous expectation of 2.5%.

The OBR maintains its forecast that inflation will be 2% in 2027.

OBR downgrades growth predictions

The Office for Budget Responsibility (OBR), the UK’s independent budget watchdog, has degraded its GDP growth forecast, according to the BBC.

The watchdog now expects GDP to grow by 1.5% on average over the five year forecast period, ending in the 2029/30 tax year, 0.3 percentage points slower than they anticipated in March.

Fuel duty frozen until September 2026

Fuel duty will be frozen at its current rate until September 2026, the BBC reports the OBR says.

The headline rate on standard petrol and diesel is currently 52.95p per litre.

Sam Walker, writer

OBR apologises for leaking forecast early

The OBR has apologised for leaking its forecast ahead of Rachel Reeves’s Autumn Budget announcement.

A statement on the OBR’s website reads:

“A link to our Economic and fiscal outlook document went live on our website too early this morning. It has been removed.

“We apologise for this technical error and have initiated an investigation into how this happened.

“We will be reporting to our Oversight Board, the Treasury, and the Commons Treasury Committee on how this happened, and we will make sure this does not happen again.

“Our Economic and fiscal outlook and supporting documents will be released when the Chancellor has finished her speech.”

Should we have had Budget leaks?

I am seriously thinking of getting my ears checked – at 12:05 I heard the Prime Minister Keir Starmer say details will be released “in 25 minutes” yet a few minutes soon after he said that it seems like the Office for Budget Responsibility then leaked its report to various media outlets, including the BBC.

This report is usually released AFTER the chancellor makes her speech - such a leak has not happened before. Some reports of what Rachel Reeves is about to say are now out - but Reeves has yet to speak.

The OBR has since apologised - but this has clearly been a Budget of leaks, causing anxiety and uncertainty. Are such leaks ever acceptable?

Kalpana Fitzpatrick, digital editor

Pension savers to be hit with salary sacrifice cap

Rachel Reeves is set to announce a cap on salary sacrifice schemes in a new blow for pension savers.

An Office for Budget Responsibility forecast, published in error and seen by BBC News, suggests the Autumn Budget will introduce a £2,000 cap on the amount of earnings that can be exchanged for pension contributions that benefit from a National Insurance exemption. This will come in from April 2029, according to the OBR.

Marc Shoffman, contributing editor

Reeves begins 2025 Budget speech

Reeves has begun her Budget speech. Much of the chancellor’s Budget has been reported ahead of this speech, after the OBR report was published in error earlier today. Reeves called it a “serious error” on the OBR’s part.

Leaked OBR report ‘deeply disappointing’ and a ‘serious error’, says Reeves

Rachel Reeves has slammed the OBR for releasing their Budget report early in error.

She said: “This is deeply disappointing and a serious error on their part. The Office of Budget Responsibility have already made a statement taking full responsibility for their mistake.”

Cash ISA limit cut to £12,000 – but not for over 65s

The annual cash ISA allowance will be reduced from £20,000 to £12,000 from April 2027 as the chancellor bids to push savers towards the stock market. However, over 65s will retain the full cash ISA allowance.

The overall allowance of £20,000 per year isn’t changing, so savers will still be able to spread their money across multiple ISA accounts up this limit.

However, Reeves may still have to convince members of the public to take a more investment-heavy approach with their savings.

Recent research polling by Paragon Bank of 1,400 cash ISA savers, found the majority would not invest in stocks and shares and would switch to regular savings accounts instead, despite this potentially driving up their income tax bill.

Sam Walker, writer

Stamp duty holiday for London IPOs

In a bid to use her Autumn Budget to boost the UK’s beleaguered stock market, Reeves has announced a three-year exemption from stamp duty for companies listing on the London Stock Exchange (LSE).

The LSE has struggled to attract high-profile companies to list on the exchange even when they are based in the UK. Unilever’s anticipated spin-off of its ice cream business will see Amsterdam land the primary listing, while neobank Revolut – Europe’s most valuable private company following a funding round that valued it at $75 billion – appears to favour listing in the US over the UK.

Investors currently have to pay 0.5% stamp duty whenever they buy UK-listed shares, but Reeves has waived this for newly-listed companies.

“This would make buying British more enticing for investors and help redress some businesses’ concerns about demand for UK shares,” said Emma Wall, chief investment strategist at Hargreaves Lansdown. “London has been losing out to New York in recent years, as businesses favour the funding and regulatory environment of the New York Stock Exchange.”

Dan McEvoy, senior writer

OBR downgrades productivity growth forecast

The OBR has downgraded their forecasts for productivity growth. The downgrade will cost the economy £16 billion.

The chancellor said the blame for this lies at the feet of the Conservatives, and promises to defy the forecast.

Chancellor announces multi-million playground makeover

Local communities are set to receive an £18 million funding package to help revamp their playgrounds.

The funding will target 200 children’s play parks across England in a bid to “breathe new life into play areas across England, creating safe, exciting spaces for thousands of children”.

The government says the funding will help ensure every child can enjoy the benefits of playing outdoors as research shows poorer children spend much less time outside than richer ones.

Daniel Hilton, junior writer

Chancellor’s £5 million books boost for secondary schools

Millions of pounds in new funding will become available to secondary schools in England to help them revitalise their school libraries.

The chancellor announced a £5 million funding package that will allow all secondary schools across the country to spend around £1,400 each on books, incentivising children to get off their phones and read instead.

The funding comes at a time when reading for pleasure is in sharp decline among young people, with the number of 8 to 18 year olds saying they enjoy reading in their spare time falling by a third since 2019.

Daniel Hilton, junior writer

Gilt yields swing following pre-Budget leak

Gilt yields – in effect, the interest paid on UK Government debt – initially fell following the leak of the OBR’s report.

Yields on 10-year gilts fell from around 4.50% to 4.43% at approximately 11.45am.

But they have since risen back to above their level before the leak – now standing at 4.52% as of 12.44pm.

Lower yields indicate greater bond market confidence in the UK government as a borrower, and vice versa.

The initial dip perhaps reflects optimism based on the policies announced in the Budget, but the reversion likely implies pessimism over the longer term outlook for productivity.

Overall, though, gilt yields are little changed from before the OBR forecast’s release.

“We’ve seen a relatively orderly reaction in gilts and the pound to the details of the budget so far,” said Matthew Ryan, head of market strategy at Ebury. “Market participants will be breathing a sigh of relief that the chancellor appears to have learnt from past mistakes, and will instead be affording herself a larger fiscal headroom in excess of £20 billion, as opposed to the razor-thin one we saw last year.”

Carrot and stick approach to ISAs

Cash ISAs will be limited to £12,000, and if you want to take advantage of the full £20,000 allowance then you will need to invest the rest.

This isn’t quite as bad as the ‘cut’ we anticipated, and it still leaves savers with a choice.

But this will still require some convincing and education. I’ll also be interested in knowing how this would work in practice, and will we see new ISA products launched? Possibly, yes.

Kalpana Fitzpatrick, digital editor

250 new Neighbourhood Health Centres to be built

The government is set to open 250 new ‘Neighbourhood Health Centres’ in the country to help improve healthcare access.

The centres, which will bring together GPs, nurses, dentists and pharmacists under one roof, will be first built in the most deprived areas of the country.

The government hopes that opening the new centres will cut NHS waiting lists and “bring an end to the postcode lottery of healthcare access”.

Daniel Hilton, online writer

Reeves extends income tax threshold freeze

Chancellor Rachel Reeves has extended the freeze on income tax thresholds from 2028 to 2031.

The move means workers will pay more tax when their salaries increase, as more of their pay is dragged into higher tax bands, leading some to label it a ‘stealth tax’.

She said: “The previous Conservative government froze personal tax thresholds from 2021 to 2028 and today I will maintain all income tax and equivalent National Insurance thresholds at their current level for a further three years from 2028.

“I know that maintaining these thresholds is a decision that will affect working people. I said that last year, and I won't pretend otherwise. Now, [...] I'm asking everyone to make a contribution.”

It means tax bands in England, Wales and Northern Ireland will remain at the following levels until the end of the 2029/30 tax year:

Source: HMRC

Income tax bands are different in Scotland.

Tax thresholds have historically risen with inflation, meaning workers paid tax on the same proportion of their earnings in real terms each year.

However, since the 2022 tax year, thresholds have been frozen at their 2021/22 levels. This raises tax receipts through a phenomenon known as ‘fiscal drag’.

The government had previously stated this freeze would end after the 2027/28 tax year, but today’s announcement means fiscal drag will continue for longer than expected.

Figures from HMRC recently showed that in the last year alone, more than a million Brits were dragged into higher tax bands because of the threshold freeze.

Daniel Hilton, writer

Class 2 National Insurance contributions abolished for people living abroad

The government is removing access to the cheapest Class 2 Voluntary National Insurance contributions (VNICs) for individuals living abroad and increasing the initial residency or contributions requirement for VNICs to 10 years.

Tax hike for property, dividend, and savings income to rise

The chancellor has confirmed rumours that tax on income from property, dividends and savings interest will be increased, rising by two percentage points.

The change will affect all taxpayers with income from these sources, on both the basic and higher rate of income tax.

Reeves said the measure will narrow the gap between the tax on income from assets and income from work.

“Even after these reforms, 90% of taxpayers will still pay no tax at all on their savings,” she added.

Daniel Hilton, writer

Mansion tax confirmed for £2 million homes

Rachel Reeves has confirmed details of a new mansion tax for homes worth £2 million and above.

From April 2028, owners of properties identified as being valued at over £2million by the Valuation Office (in 2026 prices) will have to pay a recurring annual charge on top of their current council tax.

There will be four price bands with the High Value Council Tax Surcharge rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year. This measure is estimated to raise £0.4 billion in 2029-30.

The levy is likely to cause blockages at the higher end of the property market though.

Tom Bill, head of UK residential research at Knight Frank, said: “Until the revaluations take place, buyers and sellers face years of uncertainty, especially around the £2 million threshold. Even once completed, new valuations can be challenged, which would prolong the limbo.

“The policy may also raise less than expected, especially because it is deferrable. If opposition parties say they would scrap it, many homeowners will look at the opinion polls and wait it out. When you factor in the cost of carrying out the valuation and the potential lost stamp duty revenue from a stickier market, the sums raised could look like a rounding error for the Treasury.

“More properties will inevitably get dragged into the mansion tax net, which means the proportion of terraced houses, flats and semi-detached homes will grow over the years, particularly in the capital. The term ‘mansion tax’ will increasingly feel like a misnomer.

“Overall, it feels like politics has trumped economics. One the one hand, the policy is designed to keep backbenchers happy and ensure the near-term survival of the chancellor and prime minister. On the other hand, it throws a spanner into the works of the housing market for not much money in return, which is important in the context of a Budget where spending is front-loaded. The UK already pays the highest percentage of property taxes among OECD countries.”

Marc Shoffman, contributing editor

£2,000 salary sacrifice cap confirmed

Chancellor Rachel Reeves has confirmed plans to introduce a £2,000 cap on the amount of earnings that can be exchanged for pension contributions that benefit from a National Insurance exemption.

It will be introduced from April 2029.

Introducing the cap could reportedly raise up to £2 billion a year but it will have an impact on the amount employees can save into a pension from their post tax income, ultimately affecting their take-home pay if they want to continue putting money into their workplace scheme.

Contributions above the cap will be taxed in the same way as other contributions.

Employers may also have less incentive to offer benefits, plus this could raise fears of other salary sacrifice schemes being targeted in the future such as bike to work and company car benefits.

AJ Bell has previously warned that the pensions of higher earners could be £50,000 smaller due to the salary sacrifice changes.

Steve Hitchiner, chair of the tax Group at the Society of Pensions Professionals (SPP) said: “Restricting salary sacrifice for pensions will affect the take home pay of millions of employees – especially basic rate taxpayers – and is a tax on working people, in spirit if not in name. It is also another sizeable cost to employers and, perhaps most importantly its restriction will reduce pension saving.”

Marc Shoffman, contributing editor

Cash ISA cuts – pros and cons

Cuts to the annual cash ISA allowance was shaping up to be one of the most divisive policies ahead of the Autumn Budget. Reeves appears to have struck something of a compromise by cutting the annual allowance to £12,000, but exempting over-65s who, understandably, may want to take fewer short-term risks with their money.

“This is a carefully considered solution that promotes the benefits of investing in the stock market for the long term, whilst addressing concerns of older savers who prioritise financial certainty,” said Richard Stone, CEO, Association of Investment Companies.

But Harriet Guevara, chief savings officer at Nottingham Building Society, calls the cut to the cash ISA limit “a deeply disappointing outcome for both savers and lenders”.

“We support the government’s aim to boost an investing culture in the UK,” she added, “but restricting choice is not the way to do it.”

Dan McEvoy, senior writer

EVs to be subject to new 3p per mile tax

Drivers of electric vehicles will now have to pay a flat tax of 3p per mile, bringing taxation of EVs more in line with typical vehicles.

Fully electric vehicles will be subject to the 3p per mile tax, while plug-in hybrid vehicles will have to pay 1.5p per mile.

It is estimated that the new tax will cost the average driver of a fully electric car approximately an extra £250 a year.

Daniel Hilton, writer

Electric vehicle grant extended

After announcing the new set of EV taxes, the chancellor eased the pain slightly by extending the UK’s new electric car grant until 2030.

The grant currently subsidises the price of a new EV by between £1,500 and £3,750 depending on the model.

Daniel Hilton, writer

Reeves confirms no change to income tax

It was widely trailed before the Budget but Reeves has now confirmed herself that income tax – as well as the other two ‘big three’ taxes – won’t be raised (beyond the extension to the income tax threshold freeze).

“I can confirm that I will not be increasing National Insurance, the basic higher or additional rates of income tax or VAT,” said Reeves.

“I have kept everyone's contribution as low as possible through reforms to make our tax systems stronger, closing loopholes, ensuring that the wealthiest pay their share, and building a tax system that is fairer,” she added.

Dan McEvoy, senior writer

Rail fares to be frozen for the first time in 30 years

Rail fares will be frozen at current levels for the first time in 30 years, meaning all regulated rail tickets, including season tickets, peak returns, and off–peak returns, will remain the same price next year.

The Treasury says the freeze could save commuters on more expensive routes upwards of £300 a year, assuming they commute to the office three times a week.

Without a freeze, rail fares were set to increase by 5.8% in 2026.

Daniel Hilton, junior writer

Two-child benefit cap to be lifted

The government has confirmed the two-child benefit cap will be lifted, which charities have said could lift hundreds of thousands of children out of poverty.

The cap limits the amount of extra Universal Credit families with children can receive. The cap was first introduced by the then Conservative government in 2015.

Helen Barnard, director of policy at charity Trussell, said: "This move will protect hundreds of thousands of children from growing up facing hunger and hardship.

"It shows that the chancellor has listened to families and food banks across the UK who have been imploring her to act."

Sam Walker, writer

State pension to increase by 4.8%

Thirteen million pensioners will receive a pay rise next April after the chancellor confirmed the state pension will rise by 4.8%.

Those on the full new state pension will see their weekly payments go up from £230.25 to £241.30 (£12,547 a year) under the triple lock mechanism – a rise of more than £550 per year.

The full basic state pension weekly amount will go up from £176.45 to £184.91 (£9,615 a year) – an increase of just under £440 a year.

Because the new tax year starts on 6 April 2026, you won’t get the new rate until your first pay date after this date.

Sam Walker, writer

Fuel duty frozen until September 2026

The chancellor confirmed the freeze to fuel duty will be kept in place until September 2026.

The freeze has been in place since 2011/12, meaning the headline rate on standard petrol and diesel is 52.95p per litre.

Sam Walker, writer

Reeves to cut energy bills by £150 by ending green levies

The chancellor has announced that the average annual energy bill will be cut by £150 from April 2026 onwards.

This will be done by removing the “Eco scheme”, a green levy added to energy bills, first introduced by the Conservatives.

Daniel Hilton, writer

Kemi Badenoch: Budget is a “total humiliation” and Reeves should resign

Kemi Badenoch, the Leader of the Opposition and leader of the Conservatives, will now respond to the Budget.

She opened her speech by calling the Budget a “total humiliation” and slammed the chancellor for “coming back for more” taxes.

She said: “Last year, she put up taxes by £40 billion, the biggest tax raid in British history. She promised that she wouldn't be back for more. She swore it was a one-off. She told everyone that from now on, it would be stability, and she would pay for everything with growth. Today, she has broken every single [promise].

“If she had any decency, she would resign,” she added.

Daniel Hilton, writer

Deutsche Bank: ‘Cost of living’ Autumn Budget increases headroom and reduces borrowing

Zooming out, today’s Autumn Budget – despite seeing the third-largest amount of tax increases since 2010 – appears to achieve three things, according to Sanjay Raja, chief UK economist at Deutsche Bank.

Firstly, it should keep government borrowing on a downward trajectory. “The UK’s budget deficit is expected to drop from 4.5% of GDP to 3.5% next fiscal year,” says Raja. “It is expected to drop to just under 2% of GDP by the end of the decade.”

Secondly, it has surprisingly doubled the chancellor’s fiscal headroom from £10 billion to just under £22 billion.

Thirdly, Raja expects the Budget to be disinflationary. “Budget policies are projected to reduce CPI by 0.4 percentage points in 2026/27,” says Raja. “This is reflected by a partial extension of the fuel duty freeze, reducing green levies, and a one-year freeze to rail fares.”

Dan McEvoy - senior writer

Administrative burden for pensioners on just state pension to be eased

Retirees whose sole income is the state pension will be spared the burden of having to pay very small amounts of income tax from April 2027 if the state pension exceeds the personal allowance, the chancellor announced.

It comes as the state pension is set to breach the tax-free personal allowance in 2027, according to the OBR. Without the policy, retirees whose only income is the state pension face having to pay income tax for the first time, via simple assessment.

No concrete method for implementing this has been confirmed yet, but the government says it is “exploring the best way to achieve this and will set out more detail next year”.

Daniel Hilton, writer

Benefits fraud: Plans to save over £1 billion on benefit fraud and error

Budget documents confirmed the government will extend a taskforce cracking down on fraudulent Universal Credit claims.

The Targeted Case Review scheme, first set up in 2022, will now close in 2031.

Fraudulent benefit claims cost the government £6.5 billion in the 2024/25 financial year, with £5.2 billion made up of fraudulent Universal Credit claims.

It comes as the DWP aims to keep a lid on the ballooning welfare bill, with forecasts predicting health and disability benefits will cost the government £70 billion by the end of the decade.

Sam Walker, writer

Hundreds more planners to get Britain building

The government will pump £48 million of additional funding into recruiting an extra 350 planners in England.

The planners will reportedly be brought in across both graduate and experienced roles.

Reeves is also said to be planning to unveil plans for a new Planning Careers Hub to retain planners and draw more people into these types of roles.

Sam Walker, writer

Care leavers guaranteed up to £13,500 in student loan support

All care leavers, young people who have left the care system, will be guaranteed the full student maintenance loan amount of £13,500 per academic year.

Just 14% of care leavers go to university, compared to 50% for the wider population, and they are much more likely to drop out.

The government says this is often due to financial barriers – the new loan guarantee will seek to address this issue.

Daniel Hilton, junior writer

Autumn Budget summary

Well there you have it. No rabbit in the hat though. The Autumn Budget started in an unusual way as the Office for Budget responsibility leaked its report a whole 20 minutes before the chancellor’s speech.

While this was certainly a Budget that protected vulnerable households, shielding them from the increasing cost of living. But, for everyone else, taxes are up and those with more wealth will pay more.

Here’s a quick summary:

• Cash ISA reforms. For cash savers, savings will be limited to £12,000. To take advantage of the full £20,000 allowance, you will have to invest the rest. Over 65s will see no change and keep the full £20,000 allowance.
• Salary Sacrifice pensions capped. There will be a £2,000 salary sacrifice cap confirmed - the amount of earnings that can be exchanged for pension contributions that benefit from a National Insurance exemption.
• Mansion Tax. Owners of properties worth over £2 million will have to pay a recurring annual charge on top of their current council tax. There will be four price bands with the new ‘High Value Council Tax Surcharge’ rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year.
• Tax hike on income from property, dividend, and savings by two percentage points. The change will affect all taxpayers. But she claimed 90% of taxpayers will still pay no tax at all on their savings.
• Income tax threshold freeze extended, from 2028 to 2031.
• People based abroad will no longer be able to make Class 2 National Insurance contributions.
• Two-child benefit cap to be lifted, which Reeves said will help tackle child poverty
• Electric vehicle (EV) grant extended to 2030, but EVs will be subject to new 3p per mile tax.
• Energy bills to drop by £150 from April 2026 as green levies cut.

Kalpana Fitzpatrick, digital editor

Lifetime ISA reform?

Budget documents have revealed the government will publish a consultation in early 2026 on the roll out of a new, "simpler", ISA product to help first-time buyers get a home.

Once launched, this new ISA product will be offered in place of Lifetime ISAs.

Currently, savers can add £4,000 per year into a LISA and get a 25% bonus on top from the government, up to a maximum of £1,000 a year. Any savings must be used to put down a deposit for a house that costs £450,000 or less or for retirement, otherwise you pay a 25% penalty.

However, the savings product has its critics, with some arguing the £450,000 limit for a house is not high enough for people buying in areas where property prices are above the UK average, such as London.

The £450,000 limit has also been frozen since the LISA was launched in 2017, despite house prices growing significantly since then.

Sam Walker, writer

A twist in the cash ISA limit shake-up

How much did the Budget raise taxes by?

The full Budget has now been delivered by Rachel Reeves, and the supporting documents from the Treasury and Office for Budget Responsibility (OBR) have been published.

Thanks to a slew of tax hikes, the chancellor will now have £26 billion more in tax revenue in 2029/30, according to the OBR, bringing the tax take to an all-time high of 38% of GDP in 2030/31.

The biggest chunk of this comes from the extension of the freeze on income tax thresholds until 2031, raising £8.3 billion in 2029/30.

The charging of National Insurance on salary sacrificed pension contributions is estimated to bring in around £4.7 billion in 2029/30. Increases to income tax rates on property, savings, and dividends will bring in a further £2.1 billion in 2029/30.

The rest of the revenue will be raised by the other measures announced in the Budget.

Daniel Hilton, writer

What do you think about Reeves’s Budget?

Over to you – what do you think about the announcements today? Have your say by voting in our poll below.

Recap: the Autumn Budget headlines

Here’s a quick recap of some of the major headlines that have come out of today’s Autumn Budget announcement:

• Mansion tax to apply to properties valued at over £2 million
• Cash ISA limit cut to £12,000
• Salary sacrifice on pension contributions limited to £2,000 before National Insurance payments kick in
• Higher tax rates on income from property, savings and dividends.

Of course, there are plenty of holes to pick in the specific measures that Reeves has taken. Not everyone is going to be happy when an extra £26 billion in taxes are announced.

As MoneyWeek’s digital editor Kalpana Fitzpatrick says, when considering the Budget’s winners and losers Reeves seems to have taken pains to ensure that the most financially vulnerable are shielded, and those that can pay will pay.

And the markets seem encouraged. The extra fiscal headroom has seen government borrowing costs fall markedly through today, while the FTSE 250 has gained nearly 1%.

Thank you for joining us

So, there we have it. Rachel Reeves has unveiled the 2025 Autumn Budget, increasing taxes by around £26 billion, according to the Office for Budget Responsibility (OBR).

From the new mansion tax to the tax hikes on property, savings, and dividend income, MoneyWeek writer Daniel Hilton covers the key takeaways from the Budget in a separate piece.

Thank you for joining us for our 2025 Autumn Budget coverage today.

Keep following MoneyWeek for further analysis and reaction to the Budget. You can get our top stories delivered directly to your inbox by signing up for the MoneyWeek newsletter.

Good morning and welcome back to MoneyWeek’s 2025 Autumn Budget coverage.

Chancellor Rachel Reeves delivered a wealth of tax hikes in yesterday’s speech.

As well as targeting wealthy homeowners with a new mansion tax (effective from April 2028), the chancellor extended the freeze on income tax thresholds by three years. She also capped National Insurance contributions relief on salary sacrifice into pension schemes to £2,000. The latter measure will come in from 2029.

Stick with MoneyWeek as we bring you more reaction and analysis today.

Rachel Reeves defends extension to tax threshold freeze

Rachel Reeves has addressed her decision to freeze income tax thresholds by three years. The Conservative government had frozen the thresholds until 2028, but the Labour chancellor extended the measure until 2031 in the Autumn Budget yesterday.

“I recognise that freezing thresholds does mean that we are asking ordinary people to contribute a bit more,” Reeves told BBC News today.

The chancellor said she had “kept the contribution to a minimum by changes elsewhere” and acknowledged that continuing the threshold freezes would impact working people.

“I’m not seeking to deny that," she added, "but I believe I made the fair and necessary choices yesterday to ensure we can cut the cost of living, cut NHS waiting lists and also reduce our debt and borrowing and hopefully give space to the Bank of England to cut interest rates further.”

Inheritance tax thresholds frozen until 2031

The inheritance tax (IHT) nil-rate bands will be frozen for a further year until April 2031, from April 2030, Budget documents reveal.

The IHT nil-rate band has been frozen at £325,000 and the residence nil-rate band is held at £175,000. It means families risk paying more IHT in the future as the value of assets rises.

Recent polling by Hargreaves Lansdown found 7% of people were most concerned about changes to IHT being announced in the Budget.

Sarah Coles, head of personal finance at the investing platform, said yesterday: "Nobody likes the idea of the taxman dipping into your pockets after you’ve died, so today’s news won’t be welcome."

Sam Walker, writer

Savers at risk of paying more tax as cash ISA cut and savings tax rate to be hiked

Millions of savers may face paying more tax on their savings in coming years, due to the chancellor’s cut to the cash ISA allowance.

From April 2027, under 65s will only be able to put £12,000 a year into a cash ISA, rather than the current £20,000 per year limit.

7.1 million people put money in a cash ISA in 2022/23, with just over two million (28%) putting more than £12,000 into this type of account, analysis by InvestEngine shows.

These two million savers could now face paying tax on savings interest once they exceed their personal savings allowance, if they continue saving above the new £12,000 cash ISA limit.

Savers who are 65 or older can continue putting up to £20,000 – the overall ISA allowance – into a cash ISA, if they wish to.

The personal savings allowance lets basic rate taxpayers earn £1,000 in savings interest outside of an ISA. The allowance is cut to £500 for higher rate taxpayers. Additional rate taxpayers don’t get a personal savings allowance.

The tax rate on savings income will rise by two percentage points across all bands from April 2027, meaning basic rate taxpayers will need to pay a 22% levy on savings interest above the personal savings allowance – unless the money is in a tax-free savings vehicle, such as an ISA or Premium Bonds.

The top easy access savings account currently pays an interest rate of around 4.5%.

If a basic rate taxpayer put £12,000 in a cash ISA, and held £8,000 – the difference between £20,000 and the new £12,000 limit – in a top non-ISA savings account, they would face having paid hundreds of pounds in tax after five years, analysis suggests.

Figures by InvestEngine and MoneyWeek compare how much tax on savings interest would be due in five years based on the previous savings tax rate and the hiked rate after April 2027.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “For committed savers, that want to continue saving more than £12,000 into a cash ISA, investing their money in the financial markets is one solution, provided they don’t need access to their money in the short term.”

The overall ISA allowance remains at £20,000, meaning if you maximise the cash ISA allowance, you could still put £8,000 into a stocks and shares ISA in the same tax year.

Haine added: “Equities have historically delivered higher real returns – that beat inflation – than cash over the long term.”

A time horizon of at least five years is recommended for investing in equities via a stocks and shares ISA.

Jessica Sheldon, deputy digital editor

OBR: New per mile EV tax will significantly slow sales

The government’s new 3p per mile tax on fully electric vehicles will mean hundreds of thousands fewer electric cars will be on UK streets by 2030/31 than expected, according to analysis by the Office for Budget Responsibility (OBR).

The new levy, which will come into effect in April 2028, will mean average drivers of fully electric cars could pay an extra £225 a year to the taxman. A reduced rate of 1.5p per mile will be paid by those with plug-in hybrid cars.

The UK’s fiscal watchdog said they expect the tax to raise around £1.1 billion in the 2028-29 tax year, and £1.9 billion in the following tax year.

However, they added that the measure is “likely to reduce demand for electric cars” as it increases the average lifetime cost of running an EV.

This will lead to a significant slowdown in sales, with the OBR expecting 440,000 fewer electric car sales by 2030/31.

Melanie Lane, chief executive of EV charging provider Pod, said the policy “will shake consumer confidence and potentially jeopardise investment in the sector at a critical moment”.

The chancellor announced the electric car grant will be extended until at least 2030, potentially further complicating government incentives to switch to zero-emissions vehicles.

Lane added: “We are already falling behind on the ZEV mandate that expects one in three cars sold to be zero-emissions next year and confirmation of additional mileage costs from 2028 will penalise motorists and manufacturers who are fulfilling their end of the bargain.”

Details of how the policy will be policed are yet to be published, but the government has started a consultation. They say they expect mileage to be self-reported, possibly at a car’s annual MOT.

Daniel Hilton, writer

Has the Budget cleared the path for UK stocks?

UK-listed stocks gained yesterday in the wake of the Budget and the OBR forecast. The FTSE 100 gained nearly 0.9% and the FTSE 250 – which is more exposed to the UK economy as it contains more small, domestically-focused companies compared to the large multinationals of the FTSE 100 – gained 1.2%.

“Expectations running into the budget were very low, sentiment very weak, and valuations of especially domestic and smaller companies in the UK [were] very suppressed,” said Richard Knight, portfolio manager at Merchants Trust.

There were a number of key wins the Budget was able to score as far as UK stocks were concerned. Increased fiscal headroom ought to alleviate some of the concerns about future tax rises. The Budget is also thought to be disinflationary on balance, which should encourage future interest rate cuts from the Bank of England.

Rate cuts would be “a significant positive stimulus for the UK economy and stock market” according to Knight. “We are seeing great opportunities in midcaps in particular, as they are over-sold, and sensitive to the pessimism around the UK, a great degree of which is priced-in to market valuations,” he added.

See our explainer on what the Budget means for the UK stock market for more information.

Freeze on income tax thresholds could cost taxpayers £1,300

The government's extension to a freeze on income tax thresholds could add an extra £1,292 to someone's tax bill by 2031.

Someone with a yearly income of £15,000 today faces stumping up an extra £259 over the three years between 2028 and 2031, according to analysis by AJ Bell.

Someone on £45,000 a year will take a hit of £683, while a taxpayer with an annual income of £47,000 will have to fork out an extra £1,292.

Laura Suter, head of personal finance at AJ Bell, said: "While it’s a nifty way for the government to raise money, the cumulative effect of the freeze means people are seeing their tax bills rise dramatically when compared to a system in which thresholds had increased by inflation each year."

Test your Autumn Budget knowledge

As taxpayers digest what the announcements will mean for them, Rachel Reeves and Keir Starmer have been defending the tax-raising Autumn Budget.

Starmer told Sky News today: “We kept to our manifesto in terms of what we promised but I accept the challenge that we've asked everybody to contribute."

The prime minister said the Budget measures would help protect the NHS, put money into schools and bear down on the cost of living.

From tax threshold freezes to a cut to up-front tax relief on VCT investments, how closely were you following the headlines?

Test your knowledge by taking part in our Autumn Budget quiz.

That concludes our live coverage of the Budget – one of the most eventful we can remember. We will continue unpacking what the Budget will mean for you, so keep a close eye on the MoneyWeek website. Sign up to the MoneyWeek newsletter to get the top stories delivered directly to your inbox.

Thank you for joining us.

• The Office for National Statistics (ONS) has confirmed that the Consumer Prices Index rose by 3.6% in the year to October, a fall from the three preceding months
• The Bank of England (BoE) had previously expected September to mark the high point of the current phase of inflation
• Inflation as measured by the Consumer Prices Index (CPI) came in at 3.8% for September, below expectations of 4% and unchanged from August and July
• The BoE’s Monetary Policy Committee held interest rates unchanged earlier in November, despite a weakening UK economy, over concerns about persistent inflation.

| What is inflation? | CPI versus RPI inflation | Upcoming CPI release dates |

Good afternoon, and thank you for joining our live coverage of the upcoming UK inflation data release.

Tomorrow morning, the Office for National Statistics ONS will announce the latest inflation data, covering October.

This is something of a pivotal release as far as the current inflation cycle is concerned, as the Bank of England’s forecasters expect the previous month to have marked the peak of the inflation cycle.

The headline CPI figure for September was unchanged from August, at 3.8%. If they are to resume their interest rate cutting cycle, policymakers will be looking for tomorrow’s inflation figure to come in below that level and confirm the current hypothesis – even though the number was below where most analysts had expected CPI would be for September.

Follow along for rolling preview and analysis today, plus live coverage of and reaction to the data release tomorrow morning.

When is UK inflation data released?

The ONS will release the latest UK inflation figures at 7am tomorrow (19 November). We’ll cover the release live here, and bring you live reaction afterwards.

See our explainer on upcoming CPI release dates for the calendar of future ONS inflation releases.

Where did inflation go in 2025?

Inflation has been on the rise for much of 2025, climbing from 3% in January to 3.8% in September, the latest month for which data is available.

Price growth fell in the first quarter of the year, going down to 2.6% in March. However, a combination of bill increases, minimum wage hikes, and disruption to global trade meant this decline was short-lived.

Inflation jumped 0.9 percentage points between March and April, reaching 3.5% – it was the largest month-on-month increase in inflation since October 2022, at the height of the cost of living crisis.

Since then, inflation has remained stubbornly high, climbing to an 18-month high of 3.8% in July and remaining at that level in August and September.

What do analysts expect for October UK inflation?

According to its November report, the Monetary Policy Committee (MPC) – the group within the Bank of England responsible for setting interest rates – expects inflation to fall from the September figure of 3.8% thanks to cooling in energy and food price increases as well as the inflationary impacts of the last Autumn Budget having worked their way through the system.

As such the MPC expects inflation to fall to 3.5% in the fourth quarter of 2025.

For October in particular, analysts expect to see a drop in inflation from the 3.8% level it sat at for the three preceding months.

“We estimate UK inflation will slightly improve in October's figures, slowing to 3.6% - a 0.2% improvement on the previous month,” said Grant Slade, UK economist at Morningstar. “The disinflation process remains intact, in our view. A weakening labour market and well-anchored long-term inflation expectations should allow for the impact of prior supply-side shocks to fade progressively over the coming quarters.”

Robert Wood and Elliott Jordan-Doak, chief UK economist and senior UK economist respectively at Pantheon Macroeconomics, forecast October inflation to fall to 3.5%.

What is inflation?

In brief, inflation measures the speed at which prices are rising.

Economists, particularly those at the ONS, measure price changes in a basket of goods that represent general spending patterns. Inflation typically refers to the percentage change in prices of that basket of goods over a 12-month period.

There are various different baskets that can be analysed for different purposes, but the key one as far as most economists and policymakers are concerned is the Consumer Prices Index (CPI) – unless specified, it’s that figure we’re referring to here when we cite ‘inflation’ figures (like the 3.8% figure from September).

Read more on different inflation measures here: CPI versus RPI inflation.

It is important to remember that inflation measures the rate at which prices are changing. If CPI falls from 3.8% to (say) 3.6%, that doesn’t mean prices have fallen (what’s known as ‘deflation’), but that the pace at which they are increasing has slowed.

The Bank of England, along with most central banks, targets a 2% annual rate of inflation, which is seen as economically healthy. Inflation running significantly above this level makes basic necessities unaffordable for lots of people, while running below this can be bad for economic growth.

Economist: October inflation data should kick off gradual easing

Andrew Goodwin, chief UK economist at Oxford Economics, says “October’s inflation release is likely to mark the beginning of a gradual easing in price pressures.”

He thinks that the impact of energy costs on annual inflation is likely to fall by a little over 0.2 percentage points, following a smaller increase in the energy price cap this year compared to last.

“Though there will be some mitigation from higher petrol prices, with the base effects running in the opposite direction to energy, we expect CPI inflation to fall to 3.6% from 3.8% in September,” said Goodwin.

Why inflation could surprise to the upside

It’s being widely assumed that annual inflation will have fallen between September and October, with most experts predicting a headline figure of around 3.6%.

But Sanjay Raja, chief UK economist at Deutsche Bank, thinks it could surprise to the upside. He expects UK inflation for October to come in at 3.7%.

“Larger rises in airfares and university fees, we think, will push inflation up a leg,” said Raja.

He added, though, that he expects this to “mostly unwind in November”.

Thanks for following our inflation coverage today. We're pausing here for tonight, but join us first thing tomorrow for the data release, which we'll report on live from 7am.

UK inflation day – how did prices change in October?

Good morning and welcome back to live coverage. We’re just minutes away from finding out how prices changed during the year to October.

As a recap, most analysts are expecting a drop from last month’s reading of 3.8%, to somewhere around 3.5% or 3.6%.

Stay with us as we bring you live news of the latest data, plus a wealth of reaction.

BREAKING: UK inflation fell to 3.6% in October

The latest UK inflation data is in, and confirms that the UK Consumer Prices Index increased by 3.6% in the year to October, a slowdown compared to the three preceding months.

CPI drop driven by falling housing costs

UK inflation fell from 3.8% in the year to September to 3.6% in the year to October. The biggest driver to the slowdown in price increases came from housing and household services costs, which fell from 7.3% in the year to September to 5.2% in the year to October.

Food and drinks the largest offset to slowing price increases

While housing costs slowed their pace of increase, food and non-alcoholic beverages made the largest upward contribution to inflation in the year to October. The rate of price increases in this division increased from 4.5% in the year to September to 4.9% in the year to October.

Will the fall in UK inflation lead to an interest rates cut?

Policymakers at the Bank of England have been waiting for confirmation of their hypothesis that inflation is easing before cutting interest rates further. At high level, today’s inflation read seems to give them that.

There is a potential spanner in the works, though, in the form of chancellor Rachel Reeves’ upcoming Autumn Budget.

“Evidence inflation has peaked should tip the scales towards a December rate cut. But any further rate cuts will largely depend on the contents of the Chancellor’s red box,” said George Brown, senior economist at Schroders. “If VAT and green levies are eliminated from household energy bills, inflation could fall by as much as half a percentage point.”

Brown believes that broader price pressures could linger, with wage growth remaining above target pace especially compared to productivity.

“The Bank must tread carefully given the heightened risk that high inflation becomes entrenched,” he added.

Reeves responds to fall in UK inflation

Chancellor Rachel Reeves has issued a response to the fall in UK inflation during the year to October:

“This fall in inflation is good news for households and businesses across the country, but I’m determined to do more to bring prices down,” said Reeves. “That’s why at the budget next week I will take the fair choices to deliver on the public’s priorities to cut NHS waiting lists, cut national debt and cut the cost of living.”

UK inflation drop is welcome, but picture still mixed

The economic picture is still mixed for UK consumers despite this drop in UK inflation figures.

“An almost 10% depreciation in GBP vs the Euro is adding to the cost of European imports,” said Brad Holland, director of investment strategy at J.P. Morgan Personal Investing. “Petrol and domestic gas prices are lower than they were at the start of the year… Goods inflation pressure is moderate at the moment and services inflation remains the key focus.”

Good CPI inflation fell from 2.9% in the year to September to 2.6% in the year to October, while services inflation fell from 4.7% to 4.5%.

Holland added that with the latest UK growth figures proving lacklustre, there will be pressure on the Bank of England to cut interest rates at its final meeting in December given today’s indication that UK inflation is on its way down.

Inflation figures show monetary policy is working

October’s fall in UK inflation shows that “restrictive monetary policy is working”, says Daniel Casali, chief investment strategist at wealth manager Evelyn Partners.

“Importantly, service producer price inflation (a leading indicator for consumer services inflation) has also started to trend lower, suggesting further disinflation ahead in labour-intensive sectors,” he added.

There is speculation that the Autumn Budget will have to include tax rises in order for Rachel Reeves to meet her fiscal rules. If so, that would act to reduce household disposable income and dampen demand, which should act as a further brake on inflation.

“This fiscal tightening complements monetary restraint, accelerating the path toward the Bank’s 2% inflation target. In short, this makes it harder for the MPC to justify holding rates at current restrictive levels deep into 2026,” said Casali.

Could we see a Christmas rate cut?

Bank of England governor Andrew Bailey indicated at the last Monetary Policy Committee meeting that future data releases before the final interest rates meeting of the year would be key to determining whether there would be a final cut in 2025.

Today’s data puts that firmly on the table in the opinion of Isaac Stell, investment manager at Wealth Club.

“Having remained elevated throughout the summer, it looks as if the inflationary descent is starting to gain momentum. The possibility of a pre-Christmas rate cut is now very much on the cards,” said Stell.

“All eyes now turn to the Budget,” Stell continued. With the expected fiscal tightening in the form of tax rises a foregone conclusion, policy makers at the BoE will be watching closely to see how these measures affect growth and demand.”

Services inflation is cooling

One of the big highlights in the October UK inflation data was the fall in CPI services inflation from 4.7% to 4.5%. This has been a particularly sticky part of the UK’s inflationary picture, and its cooling off points to the success of the Bank of England’s monetary tightening.

“Weaker than expected travel fares, tuition fees, and accommodation prices all [pulled] services price momentum a touch lower than market expectations,” said Sanjay Raja, chief UK economist at Deutsche Bank.

“Our suite of core services measures, which strips out some of the more volatile and erratic items in the basket, were also broadly positive – highlighting continued disinflation in the economy,” Raja continued.

He added that this gives the MPC a clearer path towards a December rate cut, with Bank of England governor Andrew Bailey likely to hold the deciding vote.

UK inflation recap: headline metrics

To recap: the headline rate of CPI inflation fell from 3.8% in the year to September (which Bank of England forecasters had expected to mark the high point of the current inflation cycle) to 3.6% in the year to October.

Here are some more key inflation indicators. Our explainer on CPI versus RPI inflation will fill you in on some of the terms here.

^{Source: Consumer price inflation from the Office for National Statistics}

Inflation fell for the first time since May

What does falling inflation mean for your savings?

Some savers will be breathing a sigh of relief after inflation fell for the first time in five months, as slowing price growth their savings will be eroded away far slower.

But while inflation is going in the right direction, a reading of 3.6% is certainly not low – and far above the Bank of England’s target of 2%.

What is more, inflation being this far above target means it is still far higher than the interest rates offered by many savings accounts, meaning consumers are seeing their cash become less valuable in real terms.

The interest rate for the average easy access savings account is around 2.5%, according to Hargreaves Lansdown, meaning a 1.1 percentage point gap exists between the average savings account and the rate of inflation.

The good news is that while the average savings rate is lower than inflation, there are still a lot of competitive options on the market.

Mark Hicks, head of active savings at Hargreaves Lansdown, says: “The market is incredibly competitive right now – especially for easy access and cash ISA. It means it’s more important than ever to shop around and consider online banks and savings platforms, because there are still plenty of accounts leading the pack, way ahead of inflation.

For money you don’t need for a specific period, it’s also well worth considering locking in a fixed rate deal now. You can get fixed terms around 4.4%, which look increasingly attractive at a time when rates and inflation are both expected to fall from here.”

The top easy access savings account on the market currently pays an interest rate of 4.55%, provided by West Brom building society, while the best one year fixed saver by Monument Bank offers 4.47%.

BestInvest: Softer inflation a boost for homeowners and buyers

There is some room for optimism among homeowners and prospective buyers after October’s inflation figures were released as slowing price growth offers a boost to affordability.

A December interest rate cut has become more likely because of falling inflation too, setting the stage for a further boost for mortgage payers.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “Easing inflation does bode well for affordability, as it raises the likelihood of further interest rate cuts.

“Mortgage rates have continued to fall in recent days, so a more competitive mortgage landscape, combined with more relaxed stress test rules and slowing market activity ahead of the Budget, provides an opportunity for committed buyers to capitalise.

“When a market hesitates in the face of change, it can be one of the best times to secure a deal,” she added.

Meanwhile, those who are coming to the end of their mortgage term and are shopping around for a better deal may also be able to find a better deal, but a lot depends on how long ago they fixed their rate.

Haine said: “Those coming off short-term fixes taken when rates peaked in 2023 may find better deals now. However, borrowers nearing the end of ultra-low five-year fixes secured before rates began their rapid ascent in late 2021 face a tougher outlook.

“They could see a sharp rise in monthly repayments unless they’ve significantly reduced their balance – though the blow may be softened if mortgage rates continue to ease.”

Where is inflation going next?

For the moment, it appears that the Bank of England’s forecasts for the long-term trajectory of UK inflation is intact.

The good news is that this should see prices fall over the next two years. The Bank of England expects it to recede to the target level of 2% by the end of 2027.

“Looking ahead, inflation is likely to remain at similar levels over the final months of this year, but several factors should pull the headline rate down through next year,” said Edward Allenby, senior economist at Oxford Economics.

Energy prices ought to act as a drag to inflation from next year as their pace of increase slows, while Allenby also feels that food price inflation has peaked and that weaker food commodity prices and a stronger pound should bring food inflation down in 2026.

“Services inflation is expected to ease steadily due to cooling pay growth and strong base effects caused by this year's increase in national insurance contributions,” he added.

Inflation, interest rates, and what it means for savers and investors

The last Monetary Policy Committee (MPC) meeting resulted in a 5-4 split in favour of holding interest rates at their prior level (4.0%), with four members of the panel voting to cut rates to 3.75%.

With the economic situation deteriorating and CPI inflation coming down, a rate cut in December looks very likely according to Nigel Green, CEO of deVere Group.

“We believe that there’s now a high probability of a Bank of England December rate cut,” he said.

That has different implications for your money, depending on whether you favour saving or investing.

“The likely December rate reduction by the Bank of England marks a transition point. For savers, this means challenge; for investors, it means opportunity for those who act with insight,” said Green.

Interest rates falling even as inflation remains above target is bad news for savers, as higher inflation eats into diminishing returns.

It’s more complicated for investors, as lower interest rates increase the present value of future cash flows from equities, bonds and real assets.

“The early adopters in such environments stand to benefit; those who cling to yesterday’s assumptions may be late to the party,” said Green.

Rathbones: "The Budget die is cast"

In terms of macroeconomic data, today’s UK inflation release is the last piece of the puzzle before chancellor Rachel Reeves announces her Autumn Budget on 26 November.

“The die is cast,” said John Wyn-Evans, head of market analysis at Rathbones. In terms of economic data that could shift the chancellor’s thinking, “there is nothing of note between now and 26 November. After what feels like months of speculation, we are now at the sharp end.”

Viewed purely through the lens of inflation control, an increase in income tax – which Reeves hinted at during her unusual pre-Budget speech on 4 November – could have been a benefit, as the tax hike would have acted as a dampener on spending and, as such, had a disinflationary impact.

But Reeves appeared to U-turn on this front last week, as the Labour government came under attack from within its own party.

“By abandoning the idea of raising income taxes, the chancellor could still be more dependent upon raising levies that increase inflation, such as taxes on any sort of consumption,” said Wyn-Evans. “Thus, we would expect the Bank of England to reserve judgement until it has seen the contents of the red briefcase.”

Recap: UK inflation falls for first time since May

Here’s a recap on the major headlines from today:

• UK inflation, as measured by the Consumer Prices Index (CPI), fell to 3.6% in the year to October – the first time the headline figure fell since May.
• A slowdown in the rate of increases of housing and household services costs was the main driver behind the headline figure falling, while food and non-alcoholic drink prices provided upward pressure on inflation.
• Services inflation, which has been sticky in recent months, fell from 4.5% to 4.7%.
• Analysts now view an interest rate cut in December as likely – though much will depend on Rachel Reeves’s Autumn Budget next week.

Will the Budget reignite inflation?

The recent bout of inflation – which today’s data seems to put in the rear-view mirror – was partly driven by inflationary measures in last year’s Autumn Budget, such as an increase to employers’ national insurance which came into effect in April.

“An increase in employer national insurance from April undoubtedly flowed into business costs and then onto consumers, so the chancellor will be keen to avoid any further policies that further ignite price rises and weigh on growth,” said Rob Morgan, chief investment analyst at Charles Stanley.

And while Reeves will likely target less inflationary measures so as to safeguard stretched household finances, she faces a precarious balancing act with the economy seemingly fragile.

“Targeted raids on income tax, residential property, banks and gambling companies will likely be the order of the day to help fill the fiscal hole without upsetting the growth applecart,” said Morgan.

Thank you for following our coverage of October's inflation data.

Join us next month when we report on November's figures, which will be released on 17 December.

Summary

• The Bank of England’s Monetary Policy Committee (MPC) decided on UK interest rates today
• The MPC has held rates at 4%, despite UK economic growth stagnating
• Inflation came in at 3.8% for September, below the expected 4% level
• But with inflation still close to double the Bank’s target rate, experts expected the MPC to remain cautious
• The upcoming Autumn Budget is another source of uncertainty
• Chancellor Rachel Reeves: "Today's forecast shows that inflation is due to fall faster than previously predicted."

| When will interest rates fall further? | UK inflation forecast | MPC meeting dates |

Good afternoon, and welcome to our live coverage of the upcoming interest rates decision.

The Bank of England’s Monetary Policy Committee (MPC) announces its latest decision tomorrow (6 November), and most experts expect it to hold interest rates at 4%.

The MPC, led by Bank of England governor Andrew Bailey, faces a tricky balancing act. On the one hand, the economy is weakening: UK wage growth is slowing, while unemployment climbs.

Inflation was expected to peak at 4% in September before falling through 2026, but the consumer prices index (CPI) reading came in at 3.8% for the month, unchanged since July, perhaps indicating that the current inflationary wave is less severe than had been expected.

But it is still nearly double the Bank’s target rate of 2%, and as such most experts think the MPC will stick with a cautious hold tomorrow.

Follow us here for rolling insight as well as live reporting of the MPC’s decision.

When does the Bank of England announce UK interest rates?

The Bank of England’s next interest rate decision will be announced tomorrow (6 November) at midday.

This is the penultimate base rate meeting of 2025, with the final meeting of the year coming just in time for Christmas on 18 December.

This week’s meeting will also include the quarterly Monetary Policy report, which will provide a detailed update to the Bank of England’s outlook and forecasts for inflation and other economic considerations.

The MPC meets roughly every six weeks. See our explainer on upcoming MPC meeting dates for the upcoming interest rate decision schedules.

Where have interest rates gone in the last 12 months?

Interest rates have been on a downward trajectory since August 2024, when the MPC voted to cut the base rate for the first time since March 2020.

Since then, the bank rate has been cut five times, going from 5.25% in August 2024 to 4% today.

In this most recent set of interest rate cuts, the MPC has maintained a “gradual and careful” approach. Cuts have more or less followed a quarterly rhythm so far, but this trend is not necessarily going to continue if the MPC decides that the economic circumstances do not warrant a rate cut.

BoE governor Andrew Bailey regularly notes that monetary policy is not on a set path.

The MPC won’t take any big decision before the Budget

There's a case to be made for an interest rate cut in November – but I don't think they'll do it.

We all expected inflation to come in higher in September, but if the latest reading is the peak as the Bank of England expects, then inflation will hopefully fall from here. And the economic picture is weakening, so the MPC will want to support growth however it can.

But for me, it's just too close to the Budget. Who knows what Rachel Reeves will spring on us later this month? There's so much unpredictability that I think the MPC will wait and see, and if there is to be another interest rate cut this year it will be at the December meeting.

The irony of this is of course that, if Reeves had scheduled her "Autumn" Budget slightly earlier in the year, then maybe the Bank would have been able to support her growth ambitions by cutting rates sooner…

Creditspring: ‘Costs aren’t going to go down overnight’ whatever the MPC decide tomorrow

It can be easy to over-emphasise the importance of the MPC’s regular meeting to dictate interest rates for regular households.

The decision – whether interest rates are hiked, held, or cut – are certainly important for much of the economy, but ordinary Brits often will not feel much of a difference either way, says Tamsin Powell at Creditspring.

“Whether the Bank of England will hold or reduce rates on Thursday, the message to households remains clear that every day costs aren’t going to go down overnight. Inflation remains stuck at 3.8%, and with further tax rises now expected as part of the Autumn Budget, many families and households will be facing a double squeeze on living costs.”

Powell added that while a reduction in interest rates could provide “short-term” relief on borrowing costs and monthly payments, “with so many households already stretched, it won’t address the ongoing pressures from rising bills, stagnant wage growth, and the arrival of the seasonal spending peak as winter and the festive season approaches.”

"Now more than ever, households need to take stock of their finances and plan ahead. Being realistic about spending and setting aside even small savings can help people stay in control as costs rise.”

What is the link between inflation and interest rates?

One of the most important economic metrics used by the Bank of England to determine their decision on interest rates is the rate of inflation.

The central bank has a mandate to keep inflation at the target level of 2%. This is done by pulling various monetary policy levers – the most obvious being the base rate.

Broadly speaking, the BoE will raise interest rates when inflation is too high, and lower them when inflation is too low.

Inflation in 2025 has been much higher than the 2% target. While price growth dipped from 3% in January 2025 to 2.6% in March, it has since soared to more than double the target – being 3.8% in July, August, and September.

When will inflation fall?

Though inflation was almost double the Bank of England’s target in September, most analysts expect that things will only get better from here on.

The Bank of England predicts inflation will peak in September and continue on a downward trajectory throughout 2026 before settling at around 2% in early 2027.

This view is shared by the economists surveyed by the Treasury each month, all of whom agreed that the average level of inflation would be lower in Q4 2026 than Q4 2025.

With inflation gradually falling back towards target next year, the MPC will likely have an easier time justifying interest rate cuts than they did when inflation was higher.

Economists expect MPC to hold UK interest rates at 4%

There are various factors at play in the MPC’s decision tomorrow. As we’ve seen, inflation might be about to fall – but it hasn’t yet. The economy is plugging away, but is far from thriving.

“We think a majority of committee members will want to see much clearer evidence of downside surprises in the data being sustained and the Agents' findings on next year's pay deals before voting to cut Bank Rate again,” said Edward Allenby, senior economist at Oxford Economics.

Allenby highlights that the MPC will be much better-informed by the time of its December meeting. There will have been two further inflation reads (covering October and November) and sets of labour market data by then, and the Autumn Budget will be a known quantity.

“We think a majority of committee members will want to see much clearer evidence of downside surprises in the data being sustained, and the Agents' findings on next year's pay deals before voting to cut Bank Rate again,” said Allenby.

Sanjary Raja, chief UK economist at Deutsche Bank, is also expecting a hold.

“We expect the MPC to maintain Bank Rate at 4%,” said Raja. “But our call is now finely balanced. The case for a quarter-point rate cut has strengthened materially on the back of a dovish round of data.”

Thanks for following our rolling preview of tomorrow's UK interest rates decision. We're finishing here for today, but join us again tomorrow morning for more preview analysis as well as live coverage of the decision and reaction from midday.

Good morning, and thank you for joining our coverage of the Bank of England's UK interest rate decision today.

As a reminder, the decision is set to be announced at midday. Most analysts are expecting the Monetary Policy Committee to hold interest rates at 4%, but some members are expected to push for a cut given the UK's lacklustre economy.

We'll bring you in-depth preview and analysis before the announcement at midday, followed by live coverage of the result and views on what it all means for your money.

What is the Monetary Policy Committee?

We’ll be talking a lot today about the Monetary Policy Committee (MPC) and its members, so now is a good time to clarify exactly what we’re talking about.

The MPC is a committee within the Bank of England that is responsible (as the name suggests) for setting monetary policy – specifically, the Bank Rate, also known as the base rate. This is generally what is being referred to when we say ‘interest rate’.

In brief, a lower Bank Rate encourages economic growth (by encouraging lending, borrowing and spending) while a higher rate reduces inflation (by doing the opposite).

The MPC has nine members: Bank of England governor Andrew Bailey, three deputy governors for monetary policy, financial stability and markets and banking, a chief economist and four external members that are directly appointed by the chancellor. The Bank of England's governor serves as chair of the MPC.

The committee's membership reflects a range of views and perspectives. ‘Hawks’ tend to favour tighter monetary policy as a counter to inflation, whereas ‘doves’ lean towards looser policy that encourages economic growth.

All nine members vote on a proposed motion from the governor at the end of the MPC meeting: at the last meeting in September, that proposal was to hold interest rates at 4%, and won 7-2 (the two dissenters both having voted for a 25 basis point cut).

How will the MPC vote?

August’s MPC meeting saw a rare tied vote, leading to a second round of voting before a majority was reached to cut interest rates by 25 basis points.

Analysts don’t foresee this level of drama this time around. Sanjay Raja, chief UK economist at Deutsche Bank, expects six of the MPC’s nine members to vote to hold rates.

“We see a 6-2-1 vote tally to keep Bank Rate unchanged,” said Raja. He foresees Dave Ramsden and Swati Dhingra voting for a 25 basis point cut, while he expects Alan Taylor – who proved the deciding vote at August’s meeting, after changing his vote to from a 50 basis point cut to a 25 basis point cut – to once again vote for a larger rate cut.

But moderates on the panel are likely to stay cautious at this meeting.

“We think the centrists on the MPC will want to see three things before dialling down restrictive policy again,” said Raja. “One, a turn in inflation expectations; two, details around the inflationary impact of the Autumn Budget; and three, and most importantly, signs that pay settlements are tracking closer to 3%.”

How do you think the MPC will vote on interest rates?

The MPC’s decision on UK interest rates is just minutes away. How do you think the committee will vote?

Markets pricing in 35% chance of UK interest rate cut

Most experts we’ve heard from think the MPC will keep UK interest rates at 4%. But that’s far from certain.

“Markets are pricing in a 35% probability of a cut to 3.75%,” says Lawrence Kaplin, chief market strategist at Equals Money. “Traders will be closely monitoring the vote count and new growth and inflation forecasts for clues as to the bank's future monetary policy path.”

Have your say on the poll below – what do you think the MPC’s interest rate decision will be?

BREAKING: MPC votes to hold UK interest rates at 4%

As widely expected, the MPC has voted to hold interest rates steady for the time being. More analysis to follow.

Close MPC vote ends in UK interest rates held

The MPC’s vote split the committee 5-4, with the four dissenters voting to reduce Bank Rate by 25 basis points to 3.75%.

Those four were Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor. The meeting’s summary minutes state that “For two members in this group (Swati Dhingra and Alan Taylor), policy was already significantly over-restrictive, which could unduly damage activity and possibly lead to an undershoot in inflation in the medium term.”

Governor of the Bank of England ultimately held the deciding vote. While less concerned about the risks of persistent inflation, he is said to have believed "there was value in waiting for further evidence".

Holding UK interest rates was “the right decision”

Despite the weakening economic backdrop, most experts seem to feel that holding off on a rate cut was correct at this stage given inflation is still running at nearly double the Bank’s target rate.

“The Bank will be in a stronger position after the dust settles from the Budget, armed with additional jobs and inflation data, to judge whether further easing is warranted in December,” said George Brown, senior economist at Schroders.

“A cautious approach remains appropriate given the risk that high inflation becomes entrenched, due to sticky wage growth and subdued productivity,” Brown continued, while conceding that much will depend on the economic fallout of the Autumn Budget.

The Budget is a "wildcard" for UK interest rate-setters

The timing of this MPC decision was never going to be conducive to cutting rates. The Bank of England thinks that September – the most recent month for which data is available – will mark the peak of the inflationary cycle, and while the read came in lower than expected, there is as yet no data to support the hypothesis that price increases are now slowing.

There are two more inflation data releases before the MPC’s next meeting in December, as well as two more sets of labour market data, which will give the committee a much clearer picture of the economy next time it sets UK interest rates.

Perhaps more significantly, by then it will also be armed with the knowledge of the Autumn Budget, which chancellor Rachel Reeves will deliver on 26 November.

“The upcoming Budget introduces a wildcard into proceedings,” says Rob Morgan, chief investment analyst at Charles Stanley. “The chancellor has doubled down on her ambition to ease the rising cost of living, which implies she will be careful about which tax rises form part of her policy announcement mix,” he added.

Reeves delivered a speech earlier this week strongly hinting that she could be about to break a manifesto commitment not to raise income tax. If so, that policy could help the MPC’s next rates decision, as it would be implicitly disinflationary.

“An income tax rise in particular would serve to quell demand, and with it some of the inflationary flames,” said Morgan.

Monetary Policy Committee: inflation “judged to have peaked”

The 5-4 vote split on the MPC today underscores the difference in views on the committee. A strong chunk clearly believed that there is a case to be made for cutting rates, and the MPC’s report, which was also published today, underscores why.

“Consumer prices index (CPI) inflation is judged to have peaked,” the report states. The Bank of England’s projections have, until now, assumed that September would mark the high point of the latest wave of inflation.

The report went on to state: “Progress on underlying disinflation continues, supported by the still restrictive stance of monetary policy. This is reflected in an easing of pay growth and services price inflation. Underlying disinflation is being underpinned by subdued economic growth and building slack in the labour market.”

And while “the risk from greater inflation persistence has become less pronounced recently, and the risk to medium-term inflation from weaker demand more apparent,” the balance of views on the MPC was that “more evidence is needed on both” before cutting UK interest rates further.

Reeves responds to UK interest rates decision

The MPC’s report also included the following line regarding the future trajectory of UK inflation:

“Inflation is likely to fall to close to 3% early next year before gradually returning towards the 2% target over the subsequent year.”

Previously, the MPC had forecast that inflation would fall down to its 2% target rate in Q3 2027.

Chancellor of the exchequer Rachel Reeves has latched onto this optimistic revision in her statement accompanying today’s decision.

“Under this government, we have seen five interest rate cuts that have helped bring down costs for families and businesses and today's forecast shows that inflation is due to fall faster than previously predicted,” said Reeves.

“At the Budget later this month I will take the fair choices that are necessary to build the strong foundations for our economy so we can continue to cut waiting lists, cut the national debt and cut the cost of living,” she added.

Deutsche Bank: three things today’s UK interest rates decision tells us

Sanjay Raja, chief UK economist at Deutsche Bank, draws three key takeaways from today’s MPC meeting.

“One, the overall MPC is putting more weight on downside risks to growth (as opposed to upside risks to inflation) – a major shift from the August decision," said Raja.

“Two, while the MPC omitted the word ‘careful’ it maintained that rates would move gradually in a downward direction ‘if progress on disinflation continues’.

“Three, governor Bailey explicitly noted that rather ‘than cutting Bank Rate now, I would prefer to wait and see if the durability in disinflation is confirmed in upcoming economic developments.’” Raja noted that this nod towards the upcoming releases confirms that they will be key in determining whether there will be a rates cut in December.

What are the chances of a December cut?

Any borrowers that had hoped that the MPC might reduce interest rates will have to wait for the next meeting, scheduled for 18 December, at the earliest.

But markets at this stage seem to view the balance of probability in favour of a rate cut in December.

“Given the better-than-expected news on inflation last month, today’s Monetary Policy Committee vote was tight,” said Frances Haque, chief economist at Santander.

“Near-term rate cut pricing changed little,” following today’s UK interest rate vote, “with markets still assigning about a 60% chance of a cut next month,” said Roman Ziruk, senior market analyst at global financial services firm Ebury.

Bank of England governor Andrew Bailey’s comments today indicate that the MPC will lean heavily on the double dose of economic data that will be published between now and 18 December.

“It’s clear that MPC members want to be sure that the outturn of data in October is not simply a one-off… before making any material changes,” said Haque. “Whether or not we'll see a base rate reduction before the end of 2025 will depend heavily on what comes out of the Budget, and whether we see recent positive trends in inflation and wage growth continue in upcoming data releases.”

How do UK interest rates affect your money?

The Bank Rate is the key metric underpinning that effectively underpins the financial system in the UK.

While the Bank of England has been cautiously lowering UK interest rates for over a year, at 4% they still remain well above their levels just three years ago. In November 2022, interest rates were hiked from 2.25% to 3%. Go back a further year to November 2021, and the base rate stood at just 0.25%.

Higher rates effectively mean higher returns for lenders and savers, but greater costs for borrowers.

“Despite today’s announcement, now is still a good time for households to take stock of their finances, as providers continue to adjust their products in response to market conditions,” said Charlie Evans, money expert at Compare the Market.

We’ll bring you updates of what today’s UK interest rates decision means for borrowers and savers later today.

UK interest rate hold: what it means for borrowers

Mortgages

While the Base Rate hasn’t changed today, that doesn’t mean all mortgage holders need to wait to see their rates fall.

“A hold means borrowers with tracker rates will have to play the waiting game,” said Sarah Coles, head of personal finance at Hargreaves Lansdown, but fixed rates could start to fall sooner.

“We’ve already seen fixed rates cut by the big banks in recent days, and the fact the vote was so close will cement expectations of rate cuts sooner rather than later, so this may not be the last of the cuts,” said Coles.

Credit cards and personal loans

“For borrowers with credit cards or personal loans, rates are likely to remain largely unchanged for now,” said Charlie Evans, money expert at Compare the Market. “But it’s worth noting that many providers set their own rates independently of the Bank of England. This means you could still find a more affordable deal by comparing what’s available, depending on your credit score and the type of card you’re applying for.”

UK interest rates hold: what it means for savers

Today’s MPC decision is unlikely to have any immediate effect on savers.

“Savings rates offered by banks and building societies tend to follow the Bank Rate,” said Charlie Evans, money expert at Compare the Market. “In this instance, they may decide to hold deposit and savings rates steady in line with the Bank’s decision.”

But with competition between providers intense, Evans adds that savers might be able to find a better rate by shopping around.

“Current account switches peaked in July this year, with August and September the next most popular months – proving banks are stepping up their offers to attract new customers,” he said.

“The best rates across the board have been holding on impressively over the past few weeks, particularly in the easy access savings and cash ISA markets,” said Mark Hicks, head of active savings at Hargreaves Lansdown. “In some cases the best on the market has actually crept up a little.”

But Hicks warned that the minutes of today’s MPC meeting “could put these rates under pressure” as they indicate a more doveish policy going forward.

“Noises from the Bank about the potential for future cuts could also mean some movement from fixed-rate savings,” said Hicks. “It means anyone who is planning to fix their savings for a period might want to take advantage while so many great rates remain.”

With rates looking likely to fall in future, cash savers might want to consider the relative merits of saving vs investing – and, indeed, whether or not now is the time to start thinking about getting started in investing if they haven’t already.

Thanks for following our live coverage of the MPC's latest UK interest rates decision. We're going to end live reporting here for now, but keep a watch out across MoneyWeek for future updates on what today's decision means.

We'll also bring live coverage of upcoming inflation data releases and, of course, the Autumn Budget later this month.

Summary

• Inflation came in at 3.8% for September, below analyst estimates of 4%.
• The Bank of England’s monetary policy committee has been keeping a close eye on this year’s persistent inflation, with many analysts suggesting stubborn inflation eliminates any chance of another base rate cut in November.
• The Bank of England expects September’s read to be the peak, and for inflation to slow down through the rest of 2025 and 2026.

| What is inflation? | CPI vs RPI inflation | When will interest rates fall further? | CPI release dates | MPC meeting dates |

What to expect from the latest inflation reading

Analysts widely anticipate that September’s report, released tomorrow, will show a climb from August’s inflation reading of 3.8%.

The Bank of England and Oxford Economics have said a 4% CPI for September is likely. September.

If their assumptions turn out to be correct, then this puts September's figure at the highest level of inflation in 22 months. The last time inflation was this high was December 2023, when it hit 4%.

Other forecasters are a little more optimistic, but not by much. Deutsche Bank analysts expect inflation to come in at 3.9% in September.

ONS to publish September inflation reading at 7am tomorrow (22 October)

Good afternoon, and welcome to our live coverage of September’s inflation figures.

This month’s inflation release will be published by the Office for National Statistics (ONS) tomorrow morning at 7am.

In the lead up to the release we’ll cover the latest estimates, analysis, and break the news tomorrow morning.

What is inflation?

Put simply, inflation is the rate at which prices increase within an economy over a given period of time.

If, for example, you bought an apple for £1 in 2024, but by 2025 the price of that apple was £1.10, the annual rate of inflation will have been 10%.

The most common way of expressing the rate of inflation is through the Consumer Prices Index (CPI), which measures the increases in price of a basket of goods, but excludes housing costs.

Measuring inflation is important because it can tell you how the spending power of your money has changed over time, and can indicate what the value of your money is in real terms.

What high inflation means for mortgages

Higher inflation is a worry for those looking to secure a mortgage. With prices still very much rising, the cost of living stretches affordability calculations.

Couple this with the ongoing freeze on income tax thresholds – where more people find themselves dragged into higher tax brackets as their wages rise – and household budgets remain under pressure when it comes to borrowing big sums.

“Persistent inflation can dent affordability and reduce borrowing power for mortgaged homeowners and first-time buyers, making it harder to secure a mortgage or move up the property ladder,” says Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, an online investment platform.

Buying a home is already more expensive after stamp duty thresholds reverted to their previous lower level in April and with speculation mounting that Reeves may unveil a fresh round of property taxes at her Budget in November, uncertainty is growing.

Stubbornly high inflation also means further interest rate cuts – and so mortgage rate cuts – are likely to come more slowly.

“While affordability has improved in recent months – thanks to lower mortgage rates, more relaxed stress test rules from lenders and more realistic pricing from sellers – shifting interest rate expectations mean that rates may not fall as fast as hoped,” says Haine.

Those coming off short-term fixes, secured during the peak post-pandemic rate period may find better deals now.

But borrowers nearing the end of ultra-low, long-term fixes taken before rates began their rapid ascent in December 2021 could face a sharp rise in monthly repayments, unless they’ve significantly reduced their outstanding balance.

– Laura Miller, Online Writer

What is driving inflation?

For the past months, inflation has remained far higher than the Bank of England’s target of 2%. A multitude of factors are to blame for this, but food inflation has been particularly sticky for the past year.

In August, the last month for which data is available, food inflation reached 5.1%, up from July’s level of 4.9%. It was the fifth month in a row when food inflation increased.

Beyond just its economic effects, food inflation is also particularly significant because it is the main way that price rises manifest themselves to consumers – it is very easy to see when your weekly shop becomes more expensive.

This is doubly concerning for the Bank of England as higher food costs are more visible to employees who may then use them to justify larger pay increases, leading to even more inflation.

What high inflation means for savers

Inflation erodes the spending power of our savings. So finding a place to put your money where the interest you get beats inflation is key – but becoming trickier as inflation stays high and interest rates fall.

The average savings rate was 3.44% as of 17 October, according to the latest Moneyfacts data. It wasn’t so long ago savers were enjoying average rates of around 5%.

Savings rates have dropped off over the past year as the Bank of England has cut the Base Rate five times since August 2024. The most recent cut, in August 2025, brought the rate down to its present level of 4% from a high of 5.25% in 2023/24.

While a flat inflation rate may slow the pace at which the top savings deals disappear – on the basis further Bank of England interest rate cuts get delayed – the downside is high inflation erodes the real value of returns.

“With savings rates on a general downwards path, shopping around for the best deals available is imperative for those hoping for an inflation-beating return, with some of the best deals remaining competitive compared to the long era of rock-bottom rates in the run-up to the pandemic,” says Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, an online investment platform.

However securing the best inflation-beating savings accounts is not without its own dangers. Tax on savings is another concern.

With the tax-free Personal Savings Allowance (PSA) thresholds frozen for the past nine years, more savers are breaching theirs, particularly higher-rate taxpayers who have a PSA of just £500. For additional rate taxpayers, the allowance is zero so they must pay tax on the first penny of interest they earn.

Using up a £20,000 ISA allowance or topping up a pension protects savings from tax on income and capital gains.

Recap: Where has inflation gone this year?

Inflation in 2025 started by falling from 3% in January to 2.6% in March, but price growth increased over the following five months.

A particularly large jump occurred in April when a deluge of consumer price increases occurred as the new financial year began, prompting inflation to rise 0.9% percentage points in just one month.

Since then, inflation has continued to increase, reaching 3.8% in July and August.

Inflation outlook: Things can only get better?

With inflation being widely expected to reach 4% in September, consumers will be bracing for heightened prices across the country.

But there is a light at the end of the tunnel. September’s reading of 4% is expected to be the highest reading for quite some time.

Forecasts by the Bank of England anticipate that inflation will fall soon after a 4% reading in September, with price growth averaging 3.75% in the second half of 2025 overall, and falling further in the new year.

By the third quarter of 2026, the central bank believes inflation will be 2.7%, and then expects inflation will return to the 2% target by the second quarter of 2027.

A sustained fall in inflation after September is also expected by Deutsche Bank who believe inflation will slow to 3.6% over the last three months of 2025.

Meanwhile, the median expected inflation reading for the last quarter of 2025 by economists surveyed by the Treasury on 17 September was 3.6%, and 2.3% for Q4 2026.

This being said, a sustained fall in inflation in 2026 is contingent on there being no significant inflationary economic shocks.

Thank you for tuning into our inflation live report this evening. We will be back tomorrow morning when September’s inflation figures are published at 7am. Join us then for the latest news and analysis.

Good morning, and welcome back to our live coverage of today’s inflation CPI release. The latest inflation figures should be published by ONS in around half an hour.

To recap, prior forecasts expect annual CPI inflation to have risen to 4% in the year to September, but that this will mark the peak for the current wave of inflation and that the pace of price increases will start to slow going into the end of this year.

Mind the inflation gap

Assuming that today’s CPI read comes in at or near the expected 4% level, it will see UK inflation running at around double the rate in the European Union.

While some of this divide is explained by distortions from price caps, as well as higher energy and food prices in the UK, Micheal Field, chief equity strategist at Morningstar, says that “the concern from investors is that there is a structural gap now, driven by a dearth of labour supply and increased trade barriers generated by Brexit”.

This gap hasn’t perturbed equity markets, for now at least. “UK equity markets are trading close to all time-highs, unperturbed for now by inflationary concerns,” says Field. “How long this confidence and long-term thinking lasts for is likely to depend on how quickly inflation falls from here.”

Breaking: UK inflation held steady at 3.8% in September

The inflation read for September has been published, and the headline figure is that UK CPI inflation was unchanged at 3.8% over the preceding 12 months, coming in below analyst expectations.

September inflation read surprises to the downside

This is a surprising result, with many analysts – including the Bank of England – having expected inflation to hit its highest level for 22 months during September.

“A variety of price movements meant inflation was unchanged overall in September,” said Grant Fitzner, ONS’s chief economist. “The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year.”

These increases were offset by lower prices for recreational and cultural purchases, such as live events. “The cost of food and non-alcoholic drinks also fell for the first time since May last year,” said Fitzner.

Reeves responds to inflation read

While the unchanged inflation read is in some respects positive news, chancellor of the exchequer Rachel Reeves has been quick to declare herself "not satisfied with these numbers".

Reeves said that "for too long, our economy has felt stuck, with people feeling like they are putting in more and getting less out. That needs to change." She also highlighted government's collective responsibility for supporting the Bank of England in lowering inflation and supporting those struggling with cost of living challenges.

Transport the main driver behind September inflation numbers

The outsized impact of the transport sector on the September inflation read is striking.

Transport contributed 0.19 percentage points to annual CPI inflation between August and September. The only other sectors that saw price increases were restaurants and hotels, and clothing and footwear, both contributing 0.02 percentage points to September CPI.

Most other sectors actually saw lower prices, including food and non-alcoholic beverages which contributed -0.06 percentage points to September CPI.

Relief for Reeves?

While UK chancellor Rachel Reeves has stated that she is not happy with persistent levels of inflation, she will no doubt be breathing a sigh of relief that today’s inflation figures have come in below expectations, as she struggles to invigorate economic growth without stoking inflation or riling the bond market.

“A surprise inflationary undershoot will spark relief all round,” said Nicholas Hyett, investment manager at Wealth Club. Despite prices rising at nearly twice the Bank of England’s target rate, he said, the prospect of any reversal of the current rate-cutting cycle seems off the cards as long as September’s read marks the inflation peak as expected.

“Fingers crossed, that leaves enough oxygen for the economy to pick up some momentum,” Hyett added.

He cautioned, though, that the upcoming Autumn Budget could upend this optimistic outlook. “We just hope the government doesn't manage to repeat last year's trick in November by carefully selecting tax increases that could have been designed to return the UK to inflationary purgatory,” he said.

Core and Services inflation surprises could see a December rate cut

The headline figure as far as most consumers are concerned is the CPI figure of 3.8%, but there are several other metrics that Bank of England rate-setters will look at optimistically from today’s read.

Core CPI – which strips out more volatile categories like food, energy and tobacco – fell to 3.5% in the 12 months to September, from 3.6% in August. CPI Services inflation was unchanged at 4.7%. Both these metrics were below analyst expectations.

“All of the Bank of England’s preferred core services measures slipped in September highlighting a more broad-based fall in price momentum,” said Sanjay Raja, chief UK economist at Deutsche Bank.

“Big picture, the odds of a Q4-25 rate cut have risen on the back of today’s data. With two additional CPI prints to watch, and two further labour market reports to come before the December meeting, we think there will be enough ammunition for the MPC to ease rates further,” said Raja. “With chancellor Reeves laying the groundwork for lowering the cost of living in the upcoming Budget, we continue to think that a December rate cut is very much in play.”

Inside transport cost inflation

Transport was the greatest upward driver in September’s CPI report, largely driven by fuel and air fare prices.

Confusingly, though, these costs fell between August and September – but at a lower rate than they did at the equivalent period last year.

Petrol prices fell on average 0.2 pence per litre between August and September 2025, compared with a fall of 5.5 pence per litre during the same period in 2024. The average price stood at 134.0 pence per litre in September 2025, down from 136.8 pence per litre a year earlier.

Air fares fell by 28.8% between August and September 2025, a significant drop: in fact, this was the third-largest decrease in September air fares since the collection of airfares changed from quarterly to monthly in 2001. But it comes on the back of the largest period in that timeframe, a 34.8% decrease during the same period last year.

So transport costs have acted to push year-on-year CPI upwards in September, despite prices having fallen during the month.

HL: Some investors expecting more interest rate cuts after inflation reading, but market may have overreacted

Today’s lower-than-expected inflation figures have reinforced a view held by some investors that the Bank of England could cut interest rates more than previously thought over the last 12 months, according to Hal Cook, senior investment analyst at Hargreaves Lansdown.

This view had started to gain traction even before today’s inflation figures and was bolstered by soft labour market statistics published on 14 October which showed unemployment increased to 4.8% in August.

With today’s inflation surprise, “investors' demand for UK government bonds (gilts) has remained strong, causing yields to fall further,” says Cook.

“The yield on the 10-year gilts has fallen to around 4.42% today (their lowest level since December 2024), having been as high as 4.75% as recently as 9 October, reflecting investors expectations of rate cuts increasing. Swaps markets are now pricing in a 60% probability of a rate cut ahead of year end, up from 40% yesterday. The Monetary Policy Committee next meets on 6 November to discuss interest rates.”

Despite some investors’ bullishness, Cook adds that the house view at Hargreaves Lansdown is that the market overreacted this morning: “inflation at 3.8% is still nearly double the Bank of England target and Andrew Bailey has been clear that future rate cuts will be made in a considered fashion and data driven. He hasn’t appeared to be in a rush to cut so far.

“There is also a risk that the upcoming Budget towards the end of November could change things. It’s therefore unclear whether the Bank of England will look to cut at their next meeting or wait to see what comes out of the Budget before cutting further – remember that they have already cut rates three times in 2025, taking them from 4.75% at the start of the year to 4% today. While a cut in November is more likely after this latest inflation data, it’s by no means guaranteed.”

September inflation is ‘small glimmer of hope’ for Reeves, but celebration muted

With all eyes starting to look towards chancellor Rachel Reeves in the run-up to her second Budget, this month’s inflation figures offer her a small comfort, according to Chris Beauchamp, chief market analyst at IG.

"While still almost double the BoE's target, news of inflation holding steady provides a small glimmer of hope for the chancellor ahead of next month's Budget. Core CPI even slowed for a second month, though policymakers will have to wait a little longer before making a bet that price growth has peaked."

But celebration of September’s inflation reading will be muted. The last time before July that price growth was above 3.8% was January 2024, meaning the UK has still experienced July's 18-month high inflation for the last three months.

Kevin Brown, savings specialist at Scottish Friendly, said: “On paper a flat inflation reading is to be welcomed. But in the real world, many families are still struggling to make ends meet after three years of blistering price increases.

“As a double blow, September’s inflation reading will probably not be enough to persuade the Monetary Policy Committee (MPC) to reduce borrowing costs again this year. Policymakers will want to see clear evidence that inflation is heading back towards their 2% target before acting, which means another rate cut this year remains unlikely.

“That’s a blow for borrowers hoping for mortgage rates to come down further. As for savers, the best course of action now is to shop around for the best possible deals to ensure that their money is working as hard as it could be or consider longer-term investments that can often offer stronger protection against inflation.”

Consumers urged not to be complacent and move savings to inflation-beating accounts

With inflation remaining much higher than the Bank of England’s target, savers have been urged not to let their savings slowly erode away in low interest rates accounts.

There is around £570 billion sitting in current and savings accounts earning less than 1.5% interest, according to research by Spring Savings, a part of Paragon Bank.

That means millions of savers are missing out on inflation-busting interest rates if they don’t switch accounts.

Derek Sprawling, head of money at Spring Savings, said: “With inflation holding steady, the message is clear: stability doesn’t equal relief. Prices remain high, and the gap between inflation and savings returns continues to hurt consumers. At Spring, we’re urging savers not to be complacent.

“Switching from a sub-1.5% account to a more competitive rate can make a meaningful difference over time. It’s about taking control of your savings, not waiting for the market to move. With £570 billion sitting in current and savings accounts earning less than 1.5%, the scale of missed opportunity is staggering.”

Retirees set for a £550 boost to the state pension next year

Today’s September inflation report is always a closely watched measure by those in receipt of the state pension because it can determine their income for the following year.

The triple lock guarantees that the state pension grows each April by the highest of either average annual earnings growth, including bonuses, from May to July, CPI inflation in the year to September, or 2.5%.

As we now have figures for both earnings growth and inflation, we know that the earnings growth data for May to July will be the determining factor.

Average total pay growth is now confirmed at 4.8% in the May to July period, and we now know inflation in the year to September has totalled 3.5%.

This means pensioners on the new state pension will enjoy a healthy annual uplift of over

£550 to their retirement income next April, tipping their total annual payment just above the £12,500 mark.

“The sting in the tail comes from frozen income tax thresholds,” says Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, an online investment platform. “With the personal allowance remaining at £12,570, it means the new state pension will be just shy of the point at which pensioners must pay tax on the benefit.”

Retirees already receiving a higher state pension may already be paying tax on their state pension, so a further uplift will drag them deeper into taxable territory.

“As winter approaches, one small comfort for pensioners earning £35,000 or less is the reinstatement of the winter fuel payment following the government’s policy U-turn in June,” Haine says.

However, next year’s state pension uplift could push some retirees above the £35,000 threshold, making them ineligible for the winter fuel payment and cancelling out some of the gain from a higher state pension payment.

– Laura Miller, Online Writer

Food inflation fell for the first time since March

One of the most closely-watched aspects of the monthly inflation figures is how much food and non-alcoholic beverages have increased in price.

Food inflation has been sticky for the past few months, having consistently risen since March and remained above the headline CPI figure.

But in a relief to many across the country, food inflation fell for the first time since March in September.

The 12-month inflation rate for food and non-alcoholic beverages was 4.5% this month, down from 5.1% in August, 4.9% in July, and 4.5% in June.

Moreover, September was the first time since May 2024 that month-on-month food inflation fell, being down by 0.2% from August 2025.

Downward contributions came from five of the eleven food and non-alcoholic beverages classes recorded by the ONS, namely:

• Vegetables
• Milk, cheese and eggs (particularly cheese)
• Bread and cereals
• Fish
• Mineral waters, soft drinks, and juices

The ONS says slowing food inflation in September was likely to have been driven in part by sales and discounting increasing at a greater rate into September 2025 than into September 2024.

Oxford Economics: Inflation at near-term peak

September’s inflation reading of 3.8% looks set to be the highest for some time as forecasts believe price growth will trend downwards for the foreseeable future, bringing a gradual end to this year’s bout of increased inflation.

Edward Allenby, senior UK economist at consultancy Oxford Economics, said: “We think inflation is at its near-term peak. The positive contribution from the energy category should drop from October, with this year's rise in the energy price cap being much smaller than last year's increase.

“The impact of stronger sterling and weaker wholesale prices should start to weigh on food price inflation around the turn of the year. But the path to softer services inflation is likely to prove more gradual, as pay growth cools steadily, the impact of firms passing on this year's increase in employers' national insurance contributions slowly fades, and base effects from regulated price changes only come into play in the spring.”

Before today’s data was published, Oxford Economics forecast inflation would be 3.9% in September. Thanks to the fractionally lower official figure, the consultancy says its near-term inflation forecast has been nudged down slightly, but they still expect CPI inflation to average 2.8% in 2026.

Peel Hunt: ‘Almost no chance’ of two more base rate cuts this year

Members of the Bank of England’s Monetary Policy Committee (MPC) will be closely monitoring today’s inflation release as they consider its impact on the trajectory of interest rate cuts.

The MPC will meet twice more before the end of 2025 (6 November, 18 December), but investor consensus is that additional base rate cuts seem unlikely this year.

This being said, Peel Hunt Economics says September’s inflation figures do mean that the two remaining 2025 MPC meetings are less of a foregone conclusion than initially thought.

Kallum Pickering, chief economist at Peel Hunt Economics, said: “Today's less-bad-than-expected inflation increases the hope that the BoE may cut again in 2025 – but a lot depends upon incoming economic data over the next few weeks.

“While we put almost no chance on two cuts in the final two BoE meetings of the year both meetings are increasingly 'live' and could involve a cut in the bank rate from its current 4.0%.”

“Note that the BoE cannot pre-empt what policies the government will announce at the 26 November budget, and hence any cut as soon as 6 November could only come on the back of policymakers' updated assessment that recent data trends point to a faster-than-expected disinflation. The December meeting, however, is a different question – by then policymakers could factor in any disinflationary policy announcements coming from the budget.”

Thank you for joining us for our live coverage of September's inflation report.

Join us again in just under a month's time when we will be bringing you the latest news and analysis for October's report, which will be published on 19 November.

Summary

• The Bank of England’s Monetary Policy Committee (MPC) voted to hold rates at 4% today (Thursday, 18 September)
• Last month the MPC lowered rates by 25 basis points in order to support the UK’s weakening economy
• Inflation, as measured by the Consumer Prices Index (CPI), hit 3.8% for the second consecutive month in August
• UK wage growth is slowing and GDP growth came in flat for July

| When will interest rates fall further? | What is inflation? | MPC meeting dates |

Experts expect UK interest rates to be unchanged following MPC’s meeting

Good afternoon, and welcome to our live coverage of tomorrow’s decision from the Bank of England’s Monetary Policy Committee (MPC) on UK interest rates.

Experts overwhelmingly expect the MPC to keep the UK base rate unchanged at 4%. The consensus is that persistent inflation will prompt the Committee to err on the side of caution, despite signs of weakness in the UK economy.

We will bring you rolling previews ahead of the decision, as well as live coverage and reaction following tomorrow’s announcement.

When does the MPC announce UK interest rates?

The MPC’s next UK interest rate decision will be announced tomorrow (18 September) at midday.

There will then be two further MPC meetings in the remainder of this year:

See our calendar of MPC meeting dates for more information.

The case for a UK interest rate cut

The Bank of England has a dual mandate. On the one hand, it has to keep inflation as close as possible to its 2% target rate. On the other hand, it has to support the growth of the UK economy. Monetary policy (changing interest rates) is the key lever it can pull in order to achieve this goal.

Lower interest rates tend to support economic activity (by encouraging borrowing and investment), higher interest rates tend to curb inflation (by reducing the amount of money in circulation).

The UK economy is weakening. GDP growth came in flat for July, and the labour market is deteriorating. The number of payrolled employees fell by 8,000 in August and wage growth (of regular earnings excluding bonuses) came in at 4.8% annually between May-July, down from 5% in the previous three-month period.

“Theoretically, softer wage data strengthens the case for another round of rate cuts,” said Kevin Brown, savings expert at Scottish Friendly.

But Brown acknowledges that sticky inflation complicates the picture, and says that “interest rates are likely to be on hold until at least spring next year”.

Inflation remains sticky, reducing chances of a UK interest rate cut

The latest inflation read, for August, was announced today (17 September). Inflation, as measured by the Consumer Prices Index (CPI), hit 3.8% for the month, unchanged from the previous reading for July.

This was in line with the Bank of England’s expectations and slightly lower than the 3.9% some analysts had forecast. But it means that inflation is still running at close to double the Bank’s 2% target.

For that reason, most experts think it is highly unlikely that the MPC will vote to cut interest rates tomorrow.

“Sticky inflation is restricting the opportunity for a fourth rate cut this year from the Bank of England,” said Scott Gardner, investment strategist at J.P. Morgan-owned digital wealth manager Nutmeg. “More progress is required on the inflation front to convince the Bank’s policymakers that a further rate cut is possible in the current economic environment.”

Gardner and others are even starting to doubt whether either of the MPC’s remaining two meetings after this week’s will result in a rate cut.

“Markets have already priced in one further cut by year-end, and whilst November may have offered opportunity for that, there’s a strong case that the MPC will exercise caution ahead of the Autumn Budget, which is shaping up to be a pivotal moment for fiscal policy,” said Steve Matthews, investment director, liquidity at Canada Life Asset Management.

How does MPC voting work?

The Monetary Policy Committee (MPC) has nine members. They are governor of the Bank of England Andrew Bailey, plus three deputy governors (for monetary policy, financial stability and markets and banking), and four external members that are appointed directly by the chancellor of the exchequer, Rachel Reeves.

All nine will vote on a proposed action to take regarding interest rates. That could be to hold them steady, or to reduce the base rate by 25 basis points (the only two realistic possibilities at this meeting). It is proposed by the governor (Andrew Bailey) based on the policy they believe will be supported by the majority of the committee.

If the proposal achieves a majority, that action is passed. In the event of a tie, the governor has the deciding vote.

Most experts predict a 7-2 split in favour of keeping rates on hold at this week’s meeting.

“We are bracing for a 7-2 vote, and forward guidance that acts to dampen expectations for cuts during the remainder of the year,” said Enrique Diaz-Alvarez, chief economist at Ebury.

Could UK interest rates fall in November?

While the MPC looks nailed-on to hold rates steady at tomorrow’s meeting, there is more debate about what could happen later on.

James Smith, UK developed markets economist at ING, thinks that a rate cut at the next meeting (on 6 November) is still on the cards.

“There is still scope for services inflation to undershoot the Bank’s forecasts further in the next release for September,” says Smith. “If we’re right about that, it would tip the balance slightly more in favour of a November rate cut, which we still narrowly expect.”

Smith adds that the likelihood of tax rises in the Autumn Budget means “there’s still a decent case for UK interest rates to fall two or three more times by next summer”.

Thanks for following our coverage ahead of the MPC's UK interest rates decision tomorrow. We're finishing coverage here for today, but join us from tomorrow morning when we'll bring you more previews and analysis, ahead of the release itself at 12pm.

Good morning, and welcome back to live coverage as the Bank of England's Monetary Policy Committee (MPC) announces its latest UK interest rates decision.

The MPC will announce the results of its meeting today at 12pm.

Experts overwhelmingly expect interest rates to be held steady at 4%, but the MPC's rhetoric will be closely scrutinised for hints as to the possibility of any further rate cuts this year.

Fed cuts interest rates ahead of Bank of England’s decision

While we’ll have to wait until 12pm today for confirmation of the Bank of England’s next decision over UK interest rates, the big news overnight is that the Federal Reserve (Fed) has cut US interest rates by 25 basis points to 4.00-4.25%.

US inflation rose to 2.9% in August, up from 2.7% in July. Despite this running ahead of the Fed’s target, the central bank has opted to cut rates. Ostensibly, this is to protect the country’s weakening economy; US unemployment recently hit its highest level in the post-pandemic era.

But US president Donald Trump has also been exerting pressure on fed chair Jerome Powell and governor Lisa Cook, leading some to speculate whether the decision has been influenced by political pressure.

“Unfortunately, the timing and circumstances of today’s move make it appear more like a concession rather than a strategic policy shift, potentially fuelling concerns about the Fed’s independence,” said Isaac Stell, investment manager at Wealth Club.

Stell added that “the decision is unlikely to satisfy the president, who made it publicly known he expected a ‘big cut’, not the 0.25% the Fed has opted for”.

Will the Bank of England follow suit today and cut UK interest rates, despite sticky inflation, in order to protect the economy?

How do interest rates affect your money?

In short, higher interest rates make it more expensive to borrow, and more rewarding to save.

“Savers pay the price of cuts to the Bank of England Base Rate, and the 0.25% reduction in August has been no exception,” said Rachel Springall, finance expert at Moneyfacts. “Overall, savings rates continue on the downward trend, with the Moneyfacts Average Savings Rate now at 3.46%, down 0.34% year-on-year.

^{Source: Moneyfacts Average Savings Rate. Calculated from the total of all on-sale, core market, variable and fixed rate savings accounts and Cash ISAs. Standard exclusions apply: Regular savings, children’s accounts, LISAs and JISAs.}

As such, now is a good time to check your savings account to ensure you’re earning the best savings rate possible.

The average mortgage rate has fallen by 0.44% over the past year, according to Moneyfacts data, despite base rate having fallen 1% during that time.

^{Source: Moneyfacts Average Mortgage Rate. Calculated from the total of all on-sale, core market, fixed and variable tracker mortgages. Standard exclusions apply: Self-build only, shared ownership only, new build only, shared equity only, standard variable rates and adverse credit.}

Which MPC members are likely to vote for a cut?

Not long to go now until the MPC’s base rate decision is announced.

The general consensus seems to be that there will be a 7-2 split on the MPC today in favour of holding interest rates where they are currently. The two ‘dissenters’ will likely vote for a rate cut, given the UK’s weakening economy.

If these predictions are correct and it is indeed two members voting for a rate cut, they are likely to be Swati Dhingra, who historically has the most dovish voting record, and Alan Taylor, who surprised at the last vote by initially voting for a 50 basis point cut.

That prompted a rare re-vote, as the proposal (a 25 basis point cut) had four votes each. Taylor changed his vote to a 25 point cut, which then became policy.

It seems unlikely, though, that other MPC members will be in favour of cutting rates given the inflationary picture.

What will Bank of England base rate guidance be?

It would be a huge shock if the MPC were to vote to cut interest rates.

“If there’s any surprise in the MPC minutes, it’s likely to come from the Bank’s forward guidance,” says Sanjay Raja, chief UK economist at Deutsche Bank.

“There are three paths here the MPC can take: one, stick to its current guidance of ‘gradual and careful’ rate cuts; two, tweak its current guidance to ‘gradual and cautious’ rate cuts; or three, simply, drop the current guidance entirely.”

We’ll find out in a few minutes’ time.

BREAKING: Bank of England base rate held at 4%

As widely expected, the MPC has voted to hold UK interest rates unchanged at 4%.

Analysis and reaction to follow.

MPC votes 7-2 in favour of holding base rate unchanged

The breakdown of votes among the MPC has also followed the expected pattern.

Swati Dhingra and Alan Taylor both voted for a 25 basis point cut; the rest of the committee voted in favour of holding UK interest rates at 4%.

MPC “focused” on inflation

The MPC’s summary highlights that inflation is expected to rise slightly in September, “before falling towards the 2% target thereafter”.

“The Committee remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term,” the minutes state.

The MPC has also reaffirmed its commitment to a “gradual and careful approach” to easing monetary policy. “The timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease.”

Next UK interest rate cut could be "some months away"

It was always unlikely that the Bank of England would cut UK interest rates this month. Even without factoring in persistent inflation, over the past year the MPC has generally opted for one interest rate cut per quarter. With the last meeting resulting in a cut, today's announcement looked set to be a hold just on the basis of timing.

But next month's meeting could be more interesting. The cutting cycle cadence suggests a 25 basis point cut, but some analysts think that the MPC might play it safe given the amount of uncertainty around inflationary peaks as well as the impact of the Autumn Budget.

"Given that data for September’s CPI won’t be available until late October, it is unlikely that any softening in prices will be apparent by the time the MPC next meets on 6 November," said Jeremy Batstone-Carr, European strategist, at Raymond James Investment Services.

"With the looming potential uncertainty created by the Autumn Budget, scheduled for 26 November, the sixth rate cut in the current cycle could still be some months away," he added.

UK interest rates could depend on Autumn Budget

The timing of the Autumn Budget, about as late as it could possibly be on 26 November, looks set to tie the Bank of England’s hands at its next MPC meeting.

“The real action may lie not with the Bank, but with Westminster,” says Isaac Stell, investment manager at Wealth Club. “The Bank of England remains sat on the sidelines, waiting to see what tax and spending decisions emerge in the budget.”

“Moves prior to this could backfire," Stell continued. “The Bank likely wants to see to see whether the government manages to navigate the budgetary gauntlet before making its next play.”

Is this the end of the cutting cycle?

The focus on inflation apparent in the Bank of England’s minutes have prompted various experts to speculate about a dramatic slowdown in the pace of cuts from here.

Rob Morgan, chief investment analyst at Charles Stanley, believes that while a cut in November is unlikely, “December’s meeting could be more finely balanced”. He concludes, though, that “it’s likely the next rate cut won’t arrive until 2026”.

Others go further than this. Ed Monk, pensions and investment specialist at Fidelity International, argues that there may be no further cuts this year and just one through the whole of 2026.

“The gilt market is indicating that no further rate cuts are likely this year, with the MPC meeting in March 2026 currently looking most likely to bring the next reduction,” said Monk. “After that, it is not obvious when the next rate reduction will arrive: one more quarter-point cut from here may be as good as it gets before 2027.”

And George Brown, senior economist at Schroders, has even hinted that the MPC could look at increasing UK interest rates.

“In our view, the balance of risks is drifting towards renewed tightening given persistent domestic inflationary pressures,” said Brown. “We continue to expect rates to remain on hold this year and next, but we can’t rule out the possibility that the Bank’s next move will be up, rather than down.”

Deutsche Bank expects three more UK interest rate cuts before 2027

The uncertainty around the Bank of England’s future monetary policy is encapsulated in the range of opinions currently being expressed by different experts.

While Schroders thinks that an interest rate hike is possible before the MPC next cuts rates, Sanjay Raja, chief UK economist at Deutsche Bank, think that greater dovishness will prevail.

“Our call remains one more rate cut in Q4 2025 and two further rate cuts in 2026,” said Raja, who thinks that the Q4 cut will likely come in December.

While Raja sees UK interest rates settling at “closer to 3.25% ahead of next summer”, there is considerable uncertainty surrounding this forecast.

“Where wage settlements and underlying inflationary pressures go over the coming months will be crucial in determining the Bank’s next steps,” he said.

Former MPC rate-setter: “MPC is in no rush”

While UK interest rates are still likely trending downwards over the long term, “the MPC is in no rush,” said Michael Saunders, former MPC rate-setter and senior economic adviser at Oxford Economics.

“The MPC is clearly worried about risks of inflation persistence, especially that the current elevated level of inflation expectations will keep pay growth relatively high,” Saunders continued. “Before cutting again, the MPC will need to see stronger evidence that pay growth is slowing to a target-consistent pace and that slower pay growth will feed through to lower services inflation.”

Saunders added that, all things considered, the next rate cut would most likely come in early 2026, rather than at either of the Q4 2025 meetings.

Thank you for following our coverage of the Bank of England’s latest UK interest rate decision. That concludes live coverage for now, but join us again on 6 November for the MPC's next meeting.

Summary

• Inflation held steady at 3.8% in August, marking no change compared to July's report.
• It is likely to be a brief hiatus, with price rises forecast to hit 4% when September's report is published next month.
• The latest reading of 3.8% is in line with what the Bank of England had forecast. Some economists had predicted a slight increase to 3.9%.
• Easing pressure from airfares helped, with prices rising by less than a year ago. This was offset by upward contributions from restaurants & hotels and motor fuels.
• The Bank of England’s next interest rate decision will be announced tomorrow. Policymakers are expected to keep rates on hold at 4%.
• The Bank’s governor Andrew Bailey recently said that inflation risks had “gone up”, casting “considerably more doubt” on the timing of future rate cuts.
• After peaking in September, inflation is expected to gradually cool, before finally returning to the 2% target in the second quarter of 2027, according to the Bank of England’s forecasts.

| What is inflation? | CPI vs RPI inflation | When will interest rates fall further? | CPI release dates | MPC meeting dates |

What to expect from tomorrow’s inflation report

Good afternoon and welcome to our inflation live coverage.

The Office for National Statistics will publish August’s inflation report tomorrow morning at 7am, and it is unlikely to make pretty reading. Forecasters think inflation will either hold steady at 3.8% or creep up slightly to 3.9%, before peaking at 4% next month when September’s figures are released.

July’s reading of 3.8%, published last month, was the highest in 18 months. Higher food prices have been a big driver of increases in recent months.

Oxford Economics: Food and petrol could push inflation higher

Advisory firm Oxford Economics is one of the forecasters that thinks inflation will inch up to 3.9% tomorrow. By comparison, the Bank of England’s forecasts point to a 3.8% reading, which is also what Deutsche Bank, the investment bank, is expecting.

A 3.9% forecast “reflects our view that further upward pressure from food prices and a smaller drag from the petrol category should more than offset the impact of a modest fall in services inflation due to July's temporary spike in air fares unwinding,” said Edward Allenby, economist at Oxford Economics.

Experts say September rate cut unlikely

The next Monetary Policy Committee (MPC) meeting will take place on 18 September, just one day after August’s inflation report is published. The Bank of England is expected to hold rates at 4%. Economists polled by Bloomberg and Reuters were unanimous in ruling out a September rate cut.

Speaking to MPs earlier this month, the Bank of England’s governor Andrew Bailey said inflation risks had “gone up”. While rates are still on a downward path, he added that there is now “considerably more doubt about exactly when and how quickly we can take those further steps”.

Oasis reunion tour could push hotel prices up

Hotel prices jumped in July, partly off the back of the Oasis reunion tour. This could add pressure in August too, with the concerts continuing into the month. Pantheon Macroeconomics thinks this, combined with other factors like higher food price inflation, will push the headline figure up to 3.9%.

“A jump in food price inflation, a fall in motor fuels last August dropping out of the annual inflation comparison, and hotel prices inflated by an Oasis concert on CPI collection day should more than offset slowing airfare inflation,” said Pantheon’s chief UK economist Robert Wood.

State pensioners more interested in September CPI report

It is August’s inflation figures that we will get tomorrow. Pensioners will have to wait another month for September’s figures (due on 22 October), which will play a role in setting how much state pension they receive in 2026/27.

Under the triple lock policy, state pension payments are uprated annually in line with inflation, earnings growth, or by 2.5% – whichever measure is highest.

September’s CPI report is the one that is used in the calculation. The wage growth figures used cover the period between May and July. These were published in today’s labour market report.

This year’s triple lock calculation will almost certainly be based on earnings growth, as this came in at 4.7% between May and July (including bonuses), whereas September’s inflation reading is expected to come in at 4%.

A 4.7% increase “would see a full new state pension rise from its current level of £230.25 per week to £241.05 per week from April,” said Helen Morrissey, head of retirement analysis at investment platform Hargreaves Lansdown.

“Those retiring on the basic state pension would see their weekly income increase from £176.45 per week to £184.75.”

See also: When will I pay tax on my state pension?

Households brace for impact of inflation

More than four in five people (83%) expect inflation to hit their personal finances in the next five years, according to research from Yorkshire Building Society. One of the most damaging effects of inflation is the way it can erode your savings.

Even if inflation were to sit at around 2% (the Bank of England’s target), it would only take 36 years for the value of your savings to halve.

Over the past few years, the rate of inflation has been far higher than this; UK inflation peaked at 11.1% in October 2022. At this elevated level, it would only take around six and a half years for the value of your money to halve.

While investing can be a good way to beat inflation over the long run, we all need to hold a decent amount of cash for day-to-day spending, short-term savings goals and emergencies.

One of the best ways to protect the value of your cash is to find a savings account that offers real returns. Although this is becoming more difficult (as interest rates have come down while inflation has gone up), there are still inflation-busting rates on the market.

Analysis from Moneyfacts, conducted last month, showed 956 accounts were still offering inflation-beating rates in August.

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.

When will inflation return to the 2% target?

As we have introduced in our previous posts, inflation is expected to peak at 4% in September’s report (published in October) before gradually falling back after that. It could be some time before it returns to the 2% target, though.

Bank of England policymakers believe inflation will average 3.1% in the first quarter of 2026, 3% in the second, 2.7% in the third and 2.5% in the fourth.

They expect it to return to the 2% target in the second quarter of 2027.

What’s happening with food inflation?

Food has been one of the categories driving inflation higher, and it is an area the Bank of England seems to be concerned about. Food prices are very visible to consumers – it is easy to see when your weekly or monthly supermarket bill is going up.

One thing the Bank is worried about is that this will translate into higher household inflation expectations, which could prompt people to bargain for bigger wage increases. It is a vicious circle, because pay rises themselves are a big driver of future inflation. The Bank needs wage growth to come down before it can cut interest rates much further.

In July’s report, the cost of food and non-alcoholic beverages rose by 4.9% – the fourth consecutive increase in the annual rate and the highest recorded since February 2024.

“The Food and Drink Federation is forecasting food inflation could reach 5.7% by the end of December and still be running at 3.1% by the end of 2026,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“Higher employer and packaging taxes are being blamed for increasing costs for companies, which they can no longer absorb.”

Thank you for following our preview analysis this evening. We will be back tomorrow morning when August's inflation figures are published at 7am. Join us for live reporting and analysis then.

Good morning – what to expect from August’s inflation report

Good morning and welcome back to our live inflation coverage. August’s CPI report will be published in less than half an hour. To recap: forecasters are expecting inflation to either hold steady at 3.8%, or creep up slightly to 3.9%. Stick with us as we bring you the latest news and analysis.

Explainer: What is inflation and how does it affect you?

You will have heard a lot about inflation over the past four years. It refers to how much the cost of goods and services is going up. Put simply, if you spent £1 on a product this time last year and annual inflation now stood at 10%, that same product would be likely to cost £1.10.

Economists believe having some inflation – a target level of 2% – is a sign of a healthy economy because it encourages spending and means GDP can grow. However, too much inflation can be harmful to living standards, as we have seen through the cost-of-living crisis.

At 3.8% (July's inflation reading), prices are currently rising at almost double the Bank of England’s target rate, which is why interest rates are very unlikely to be cut tomorrow.

Interested in learning more? See our full inflation explainer.

The path of inflation

After slowing considerably from its peak of 11.1% in 2022, inflation has been heating up again in recent months.

BREAKING: Inflation holds steady at 3.8%

Inflation held steady at 3.8% in August, marking no change compared to July. This is in line with what the Bank of England had forecast.

Easing pressure from airfares

Airfares made the largest downward contribution to the monthly change in CPI, according to the Office for National Statistics (ONS), while restaurants & hotels and motor fuels added upward pressure.

Airfares rose by 2.1% between July and August 2025, compared with a rise of 22.2% between the same months in 2024.

The smaller monthly change this year can be explained by July's high index level. There was a large spike in airfares in last month's report, partly explained by the timing of school holidays in 2025 versus 2024.

Fuel prices rose this August after falling a year ago

Fuel prices added upward pressure to August's inflation reading, rising on a monthly basis this year after having fallen a year ago.

The average price of petrol rose by 0.3 pence per litre between July and August 2025, compared with a fall of 2.1 pence a year ago.

Similarly, the price of diesel rose by 0.8 pence per litre in August 2025, compared with a fall of 2.6 pence a year ago.

Supersonic hotel demand from Oasis concert?

Hotel and restaurant costs rose by 3.8% on an annual basis in August, up from 3.4% in July. The Oasis reunion tour may have been partly to blame, with index collection day falling on 12 August this month. One of the Edinburgh gigs took place that day, suggesting fans may have been looking for places to stay overnight.

Food inflation rises for fifth consecutive month

Food inflation has been coming in hot in recent months, and August's report showed a fifth consecutive increase in this category.

The cost of food and non-alcoholic beverages rose by 5.1% on an annual basis in August, up from 4.9% in July.

Vegetables, milk, cheese, eggs and fish all added upward pressure. This was partially offset by small downward effects from bread, cereals, oils and fats.

Rachel Reeves: "I know families are finding it tough"

Chancellor Rachel Reeves responded to this month's inflation report by acknowledging the challenges faced by many households as cost pressures pick up again.

She said: "I know families are finding it tough and that for many the economy feels stuck. That's why I’m determined to bring costs down and support people who are facing higher bills.

"Through our Plan for Change we are taking action – raising the National Living Wage, extending the £3 bus fare cap, and expanding free school meals, to put more money in people's pockets while we work to build a stronger, more stable economy that rewards hard work."

Little relief for struggling households

Although a pause in the ascent of the inflation rate is better news than an acceleration, many will be bracing themselves for next month. September’s report (due on 22 October) is expected to show a reading of 4%.

This month’s report will offer “little relief for cash-strapped households still grappling with overstretched budgets,” said Alice Haine, personal finance analyst at investment platform Bestinvest.

She added: “Stubborn inflation is worrying for consumers as it means prices are still very much on the rise – they are just increasing at the same pace as the previous month.

“Add to that the extended freeze on income tax thresholds, where more people find themselves dragged into higher tax brackets as their wages rise, and household budgets will continue to feel stretched.”

Haine explains that building a strong financial foundation is key to navigating economic uncertainty. Tips she shares include:

• Living within your means
• Delaying big-ticket purchases
• Cancelling unused subscriptions
• Cutting non-essential spending
• Shifting expensive debts to a 0% balance transfer credit card
• Building up emergency savings to cover three to six months of essential expenses

Also see: How much should I have in emergency savings?

Slowdown in core and services inflation

One positive development within August’s report is that both core and services inflation slowed compared to July. Core CPI came in at 3.6%, down from 3.8% previously. Services CPI came in at 4.7%, down from 5%.

Core inflation strips out categories that tend to see short, sharp fluctuations in prices, like food and energy, making it a good indicator of how embedded price pressures have become.

Services inflation covers things like hotel stays, airfares, educational costs and more. Services make up around 80% of the UK economy, so this is an important measure.

“Slowing services and core inflation offers a rare silver lining as it suggests that underlying price pressures are becoming less sticky,” said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.

“The squeeze from a cooling jobs market should help keep it on a downward path.”

Encouraging report today – but BoE will want to see more of the same

Deutsche Bank, the investment bank, said today’s inflation data would be seen as “a positive for markets – even, perhaps, encouraging”. However, the Bank of England will want to see more evidence that inflation is coming under control before cutting interest rates again. Remember that policymakers think inflation will peak at 4% in the next report.

“This is why we continue to see a slightly longer pause when it comes to the Bank’s next rate move,” said Sanjay Raja, Deutsche Bank’s chief UK economist. He doesn’t think the Monetary Policy Committee (MPC) will trim rates again until December.

“For us, the MPC may want to wait for a larger accumulation of evidence before dialling down restrictive policy again,” he added. “Seeing the downtrend in CPI begin could assuage fears on the committee that the hump in inflation is not turning into a plateau.”

“Tug of war within Threadneedle Street”

Tomorrow’s meeting at the Bank of England looks close to a foregone conclusion. Economists polled by Reuters and Bloomberg unanimously said they expect rates to be kept on hold at 4%. We could see a 7-2 voting split, with only MPC doves Swati Dhingra and Alan Taylor voting for a cut.

If this forecast materialises, it would be a decisive outcome but, longer term, the votes may become more scattered. We have seen some division among committee members in recent meetings, including in August, where two votes were required before a 5-4 split was achieved.

Looking beyond September’s meeting, “the inflation outlook has triggered a tug of war within Threadneedle Street,” said Rob Morgan, chief investment analyst at wealth management firm Charles Stanley.

“Some MPC members argue that signs of weakening demand and softening price pressures justify another rate cut before year-end, continuing the Bank’s ‘gradual and careful’ easing cycle,” he added. “However, the persistence of elevated inflation complicates that narrative.”

With CPI expected to come in at 4% in September, Morgan thinks the MPC could opt to hold rates steady at November’s meeting too. While GDP growth is “tepid”, it hasn’t slowed enough to confirm a decisive disinflationary trend, in his view.

“Little to cheer for mortgage borrowers”

Although expected, an inflation reading of 3.8% will still come as bad news to some mortgage borrowers. It will do little to dissuade the Monetary Policy Committee (MPC) from sounding a cautious note in its statement tomorrow.

A ‘hold’ decision is already priced in, but hawkish rhetoric could cause markets to become more cautious on the longer-term outlook for rate cuts, impacting mortgage pricing.

“Mortgage rates have edged up in recent weeks, as the rate outlook of ‘higher for longer’ has taken its toll on lenders’ funding,” said David Hollingworth, associate director at broker L&C Mortgages.

“Although that hasn’t sent rates sky high, it’s certainly forcing borrowers to make quicker decisions and act quickly to secure a deal.”

How to beat inflation

One of the best ways to protect your cash savings is to find an account offering real returns – i.e. paying inflation-beating interest rates. But even then, most people shouldn’t hold excessive amounts of cash.

Once you have built up enough savings to cover day-to-day spending, emergencies and near-term savings goals (which could range from a house deposit to a wedding), consider investing. A diversified portfolio of investments can be a good guard against inflation, and is one of the best ways of building long-term wealth.

Before investing, you should be willing to lock your money up for five years or more, as this can help you ride out any short-term market volatility.

Although equity markets can be volatile, data from Barclays looking back over the past 120 years shows that equities have outperformed cash 70% of the time, based on a two-year holding period. If you extend the holding period to 10 years, it rises to 91% of the time.

Also see: Beginner's guide to investing

House price inflation slows to 2.8%

Each month on inflation day, HM Land Registry also publishes its latest house price report, showing how much property prices have gone up or down over the past year.

Land Registry data is published with a two-month time lag, so this month’s report covers July (rather than August, which is what the CPI report covers).

Annual house price growth slowed to 2.8% in July, down from a revised estimate of 3.6% in June. On a monthly basis, prices grew by 0.3%. It takes the typical UK property to £270,000, which is around £8,000 higher than a year ago.

Food inflation could reflect tax changes in last year’s Budget

Weak growth and high borrowing costs have created a challenging fiscal backdrop for the government, particularly given its promise not to raise the three main working taxes.

In an attempt to raise money in last year’s Budget, the government increased employers’ National Insurance contributions, but it was far from a silver bullet. The effects are now being seen in the economic data.

Economists and company bosses say rising food prices are a consequence of higher labour costs. The National Insurance hike has made it more expensive for companies to hire people, and they are offsetting some of the impact by putting prices up. An increase to the minimum wage has had a similar effect.

“Retailers are doing everything they can to deliver great value for their customers, but are unable to absorb the £7 billion in costs they have been landed with this year thanks to the rising cost of National Insurance, a higher National Living Wage, and a new packaging tax,” said Kris Hamer, director of insight at the British Retail Consortium.

He warns that imposing more costs on businesses in this year’s Budget could push inflation even higher.

Traders pricing in just one more rate cut

According to investment platform Hargreaves Lansdown, traders are pricing in just one more rate cut between now and the end of 2026. Markets have become more cautious in recent weeks after the Bank of England expressed concern about inflation pressures.

Some economists are slightly more optimistic. Financial institution ING still thinks we could see a cut in November this year, with more to follow in 2026. Deutsche Bank broadly agrees, but thinks this year’s remaining cut will come in December.

ING’s UK economist James Smith said: “Certainly, we aren’t in the camp that thinks rate cuts are over. Services inflation should show more visible progress next spring, while wage growth should ease below 4% by year-end.

“Add in the fact that the late-November Autumn Budget is likely to be dominated by tax rises, and we think there’s still a decent case for UK interest rates to fall two or three more times by next summer.”

Thank you for following our inflation live coverage today. The next report (covering September) will be published on 22 October. For the remaining dates in 2025, see our CPI release calendar.

The week's busy news agenda will continue tomorrow with the Bank of England's interest rate decision, due at midday. Our preview analysis has already started over on our interest rates live report. Join us there.

Summary

• Nvidia reported Q2 revenue of $46.74 billion and non-GAAP earnings per share of $1.05, beating expectations on both fronts
• Data centre revenue of $41.1 billion missed expectations of $41.2 billion
• Shares in Nvidia fell over 3% soon after the results
• Nvidia’s stock fell last week amid concerns that the AI sector could be a bubble
• Last quarter, Nvidia revealed a $4.5 billion dip in profits thanks to US export controls on AI chips to China
• Nvidia has reported no sales of H20 chips to China-based customers during Q2
• Nvidia became the world’s first $4 trillion company last month

The team at MoneyWeek is reporting live. Scroll for the latest news and analysis.

| Nvidia shares | Magnificent 7 stocks | DeepSeek and China tech | AI ETFs to consider buying |

Good afternoon, and welcome to our rolling coverage of Nvidia’s (NASDAQ:NVDA) upcoming earning release.

Nvidia’s results have become a major event in the stock market calendar. The world’s most valuable company is a major driver of S&P 500 moves; it accounts for more than 7.6% of the index. What is good for Nvidia is, in a very real sense, good for the global stock market.

So when reports emerged that Sam Altman, CEO of OpenAI and as such one of the AI industry’s leading lights, thinks that AI is a “bubble”, it wasn’t just Nvidia that suffered. The S&P 500 fell 1.2%, led by Nvidia shedding 3.9%, between 18 and 21 August.

While both the index and Nvidia’s share price have since recovered, all eyes are (as always) on Nvidia and its CEO Jensen Huang to produce a set of results that can reassure nervy investors that the technological revolution the company has triggered is still running strong.

When does Nvidia announce its results?

Nvidia will announce results for the second quarter (Q2) of its 2026 financial year tomorrow (27 August) after US markets close – that is, any time from 9pm onwards, BST.

Nvidia’s earnings call is scheduled for 2pm PT, or 10pm BST. The results will be released within the hour-long gap between market close and the start of the earnings call. Nvidia’s shares will still be traded during the earnings call, with after-hours trading running until as late as 8pm ET (1am BST).

Depending on the results, there could be significant volatility in Nvidia’s stock price while the earnings call is ongoing.

What do analysts expect from Nvidia’s results?

As always, the expectations for Nvidia are sky-high leading into its earnings. The challenge as far as anyone watching Nvidia’s share price moves in the aftermath is concerned is that not only does it need to beat analysts’ expectations, but often it needs to beat them by a lot, in order for the stock to rise, as investors have become accustomed to Nvidia’s results exceeding expectations.

Here, though, are the headline expectations according to analysts polled by FactSet and LSEG.

The LSEG numbers imply a 53% year-on-year increase in revenue and a 49% rise in profits.

There will also be other aspects like Nvidia’s outlook and commentary from management around the key business opportunities and threats (such as the state of play with China exports) that could shape how Nvidia’s stock responds following its earnings release.

How much will Nvidia’s China revenue rebound?

The big talking point following Nvidia’s results last quarter was the $4.5 billion hit the company took thanks to US export controls on AI chip exports to China.

“Investors will be laser-focused on the resumption of China sales and forward guidance, seeking clarity on just how much Chinese revenue is back in play,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Nvidia and rival AMD reached a revenue sharing agreement with the US government, revealed earlier in August, that will see both granted export licenses in exchange for 15% of their revenue from China.

It seems unlikely, though, that this will fully restore the hole that was missing from last quarter’s results.

“Our adjusted NVDA numbers anticipate only about $1 billion - $1.5 billion in quarterly incremental revenue this year from China,” said Matt Bryson, managing director, equity research at Wedbush Securities. Bryson anticipates that China revenue will then ramp up in 2026, but that for now the numbers will be “well below the $8B NVDA believed it would have generated in Q2”.

Bubble concerns linger despite S&P 500 strength

Nvidia’s results will be a stern test of the resilience of the AI market’s ongoing bull run.

According to Tom Stevenson, investment director at Fidelity International, Nvidia’s earnings call “will be closely scrutinised for signs that the artificial intelligence boom might be running out of steam.

“Tech stocks, fuelled by investor enthusiasm for AI, have pushed the S&P 500 9% higher so far this year, building on the strong returns in 2023 and 2024,” adds Stevenson. “But recently concerns about the high valuations attached to anything AI-related have seemed to puncture the bubble.”

Nvidia's shares gain in penultimate session before earnings

Nvidia's shares are gaining strength in the run-in to tomorrow's results announcement. The stock is up around 1% so far today, having gained 1.1% during yesterday's session.

That's everything from us for today, but join us again tomorrow for more analysis and preview of Nvidia's earnings release.

Nvidia shares staging a recovery following last week's decline

Good morning, and welcome back to live coverage ahead of Nvidia's upcoming earnings release.

Nvidia shares gained 1.1% during yesterday's session, bringing the company's share price close to its level before last week's declines.

Follow us throughout the day for live updates and analysis ahead of Nvidia's results this evenig.

Nvidia launches new robotics supercomputer

Nvidia's results week got off to a positive start on Monday when the company announced Jetson Thor, its latest supercomputer powered by its Blackwell generation chips, to power physical AI and robotics.

Jetson Thor boasts 7.5x higher AI compute than Nvidia's previous robotics platform AGX Orin, with 128GB of memory. A developer kit for one of the "robot brains" costs $3,499, according to CNBC.

In June, Nvidia's CEO Jensen Huang described robotics as one of Nvidia's two largest growth opportunities (alongside AI), "representing a multitrillion-dollar growth opportunity".

Why are AI stocks under pressure?

While Nvidia's shares have been rallying over recent days they were dented last week following a wave of pessimism around the AI boom's staying power.

We saw Sam Altman, CEO of OpenAI, describe the AI market as a bubble the week before. Then, last week, researchers from MIT published a report saying that despite $30-40 billion having been spent by businesses on generative AI, 95% are yet to see a return.

That's a problem for Nvidia largely because it trades at forty times its projected earnings (and nearly 60 times its profits for the last 12 months). To justify these margins, it has to keep growing its revenue and profits for many years to come.

But if the generative AI boom doesn't deliver for businesses, there is no guarantee that demand for its chips, which at present comfortably outstrips supply, will endure.

How resilient is demand for Nvidia’s chips?

While there have been various causes for pessimism regarding the AI boom’s staying power over the last week or two, there is no reason to believe that Nvidia’s sales are under any real threat any time soon.

Dan Ives, head of global technology research at Wedbush Securities, says that his research suggests that demand for the company’s GPUs is currently running at ten times supply.

“AI is being driven by a handful of US big tech players spending almost $350 billion on capex this year,” says Ives. He also adds that enterprises and governments around the world are upping their spend, which ought to further catalyse demand. Nvidia’s last earnings release was accompanied by news that the Kingdom of Saudi Arabia was partnering with Nvidia to deliver up to 500 megawatts’ worth of capacity for AI factories in the nation.

Much of the capex that has already been announced by Magnificent 7 stocks this quarter “is set to flow straight to Nvidia”, says Josh Gilbert, market analyst at eToro. “That bodes well not only for this week’s earnings, but also for the company’s outlook in the quarters ahead.

“Nvidia is in a highly enviable position as the go-to hardware manufacturer, and that’s not likely to change anytime soon,” Gilbert adds.

Nvidia’s revenue growth curve

It is almost impossible for a company to maintain explosive growth rates indefinitely, and the signs are that Nvidia’s revenue growth is slowing down.

Having routinely tripled its revenue year-over-year during the height of the generative AI boom, Nvidia’s expected revenue for tonight’s results would amount to a little over 50% growth from the equivalent period last year.

This is already priced in, but any indication that Nvidia’s growth rates could be slowing faster than expected could prompt a negative reaction from the markets.

“Nvidia may be the market’s heartbeat, but that comes with the expectation of perfection,” says Josh Gilbert, market analyst at eToro. “Even the smallest disappointment could spark outsized volatility across broader markets, not just Nvidia shares.”

Diversifying beyond Nvidia

As several experts have pointed out, Nvidia’s results matter because the company accounts for such a huge chunk of the stock market. Its status as the bellwether for the AI boom, which is the most influential trend in the world at present, also means its results will have a ripple effect across the entire market.

Nvidia is held by nine out of ten AI and big data funds globally, according to Kenneth Lamont, principal at Morningstar.

“Nvidia’s elevated volatility – unusual for a company of its size – reflects both its position at the forefront of a highly uncertain technological rollout and its hypersensitivity to shifts in growth assumptions underpinning that technology,” says Lamont.

“Investors in AI can smooth their journey by spreading exposure across the broader AI value chain,” Lamont adds. Given the elevated valuations and huge spending from some of the world’s largest tech companies, “some of the best opportunities may lie downstream, in companies best positioned to harness increasingly powerful and low-cost AI tools to improve their margins,” he says.

Recap: what do analysts expect from Nvidia’s results?

As a reminder, here are the headline expectations for Nvidia’s earnings release this evening according to analysts polled by FactSet and LSEG:

These numbers imply around 53% revenue growth and 49% increase in profits year-on-year.

Nvidia’s margins could be another focal point tonight beyond indicators of demand trends.

“Profit margins will be a focal point this week, after dipping slightly due to the Blackwell build-out,” said Josh Gilbert, market analyst at eToro. “Last quarter’s heavy investment in ramping up next-gen chips trimmed gross margins by a few percentage points, but with adoption growing, margins are set to rise again.”

BREAKING: Nvidia shares fluctuate at start of final session pre-earnings

US markets are now open. Nvidia's shares opened the session 0.2% higher than yesterday's close, but they have since fallen back to 0.4% below it.

Expect further volatility in Nvidia's stock following this evening's results.

China ramps up domestic competitors for Nvidia’s chips

While China’s AI chip market, which Nvidia CEO Jensen Huang has stated could grow to $50 billion in the next two years, remains a key target for Nvidia, the country is looking to reduce its companies’ dependence on Nvidia’s chips.

The FT reports today that chipmakers in China are looking to triple their output next year, with new fabs (chip manufacturing facilities) dedicated to producing chips from Chinese designers like Huawei coming online potentially before the end of the year.

There is also a drive to produce chips that are compatible with the latest specifications from Chinese AI developer DeepSeek, which shook up big tech stocks, particularly Nvidia, earlier this year.

Last week, DeepSeek announced that its models would use a new FP8 data format which would adapt to the next generation of Chinese-produced chips, though no individual supplier was specified.

Read more on DeepSeek and China’s high tech industry here: DeepSeek and China tech.

How significant is Chinese chip competition for Nvidia?

Given the potential size of the AI chip market in China, as well as its near-monopoly on the global market as it stands, it could conceivably pose a significant threat to Nvidia’s prospects if Chinese competitors can match Nvidia’s GPUs for performance.

“Nvidia has enjoyed something of an unchallenged position within the chip supply industry, which investors and commentators have seen reflected in the share price,” says Bola Onifade, portfolio manager at J.P. Morgan-owned Nutmeg. “New challengers in the form of Chinese chipmakers are likely to create pressure on Nvidia.”

But it wouldn’t necessarily undercut Nvidia’s position entirely overnight. There are various factors and regional variations that could come into play.

“The successful adoption of any Chinese chips will be weighed against the potential reaction from the US, whether in the form of further tariffs, outright bans, or indirect pressure applied to other countries,” says Onifade.

This is certainly one to watch as far as Nvidia’s longer term prospects are concerned, but unlikely to move the dial at all during tonight’s results.

Nvidia’s share price since Q1 results

Nvidia’s shares closed 26 August at $181.77. The last time it announced results (28 May), the stock opened the following session at $142.25. In other words, Nvidia’s stock has gained around 28% since its last earnings announcement.

Assuming Nvidia’s earnings match analysts’ forecast of $1.01, they will have risen around 25% over the same period – so slightly lagging the share price increase over this time. This is perhaps justified by the fact that Nvidia’s profits would have been significantly higher last quarter were it not for the dent in China market revenue, which should have been at least partially remedied in the meantime.

Magnificent Seven capex

Much of the optimism around Nvidia in the run-in to these results is based on the amount of spending that other big tech companies have pledged. Nvidia is expected to capture most of what these companies spend on computing infrastructure, given that it is the foremost designer of cutting edge AI chips.

As a recap, here are some of the capex commitments made by other Magnificent Seven companies during this earnings season so far:

^{*Microsoft’s FY 2025 ended last quarter; this figure represents confirmed capex spend throughout that year.}

While Nvidia won’t capture the entirety of this spend, these figures underscore the scale of big tech spending on AI infrastructure, and as such the scope for Nvidia’s revenue to grow.

High expectations mean high risks for Nvidia’s stock

Looking back a little further than Nvidia’s last earnings results, Nvidia’s share price gained 92.7% between 25 April and 26 August, just four months later.

“Investors expect a lot from the company,” says Rob Perrone, investment specialist at Orbis Investments. While investors, he says, can “expect rapid growth, juicy profits, bullish guidance and reassurance about China’s taste for de-tuned chips… all that bullish reassurance may not drive the shares higher.

“It’s an open question whether even great results will be good enough to beat expectations. When expectations are high, so is risk,” Perrone adds.

Guidance could underwhelm in Nvidia’s results

The broad expectation is that Nvidia’s numbers will at least meet, and possibly exceed, expectations at tonight’s results announcement as far as the quarter just ended is concerned.

“Revenues and earnings should easily be beat,” says Paul Meeks, managing director and head of technology research at Freedom Capital. But he highlights the consensus among analysts is that Nvidia will guide for 15% quarter-on-quarter growth – implying around $53 billion in Q3 revenue.

“That’s a very big jump,” says Meeks. “I’m worried that too many analysts on Wall Street have a lot of Chinese revenues baked into that.

“I don’t know if [Nvidia’s revenue from China] is going to be zero, I don’t know if it’s going to be a couple of billion dollars,” he says. “It could be as high as eight billion, but we just don’t know, because we don’t know what president Trump will do between now and then.”

Nvidia tends to be cautious with its guidance, which is why it so often smashes expectations. Given Q3 revenue will hinge on factors outside its control, most notably China-US trade relations, Meeks thinks that the guidance figure Nvidia publishes tonight could underwhelm.

That would likely prompt a negative reaction in Nvidia’s share price. For that reason, Meeks says, “I’m telling folks you should not invest ahead of the [earnings] call. You might get a chance to buy it lower.”

Morningstar: Nvidia’s results and China update could swing the market

Reiterating the point that the status of its Chinese sales will be under the spotlight in Nvidia’s results tonight, Dave Sekera, US market strategist at Morningstar Research Services, said “the market will want details on the status of H2O chips that were being sold to China.”

These chips had been specially designed to circumvent US export restrictions on strategically critical technology to China, but Trump then cut off even these. The ban has since been lifted in exchange for Nvidia sharing 15% of revenues with the US government, but the picture has since been complicated further.

“There are reports that Nvidia is halting production of those chip sets as the Chinese government has concerns about cybersecurity,” says Sekera. “If that report is correct, then we’re going to want to hear a lot more detail from Nvidia as they’re reportedly about to introduce a newer chip, the B30A, that is intended to replace the H2O.”

Nvidia’s results announcement, he says, is “going to be a huge, potentially market-moving event for all AI stocks depending on earnings results, guidance, and what management says during the conference call.”

Morningstar currently forecasts full year earnings of $4.54 per share this year and $6.42 next year, meaning Nvidia stock currently trades at around 40 times this year’s earnings, and 28 times next year’s.

“Those are some pretty lofty multiples, so Nvidia will need to put up the numbers to justify that,” said Sekera.

We're going to pause coverage here for a few hours. Join us from shortly before 9pm, though, when we will bring you live updates as Nvidia's results are released.

Good evening, and welcome back to live coverage. Only minutes to go now until Nvidia's results for the second quarter are released.

As a reminder, analysts expect earnings of $1.01 per share on revenue of $46.05 billion. But much will hinge not just on the top line results, but on Nvidia's forward guidance and updates from the pivotal Chinese market.

Breaking: Nvidia shares close 0.09% down ahead of results

Nvidia’s shares finish the final session before Q2 results just a shade below where they started. But the real volatility will happen soon, once the company’s results are released. Stay tuned as we bring you all the latest.

Now it's just a matter of waiting for Nvidia's results to land. That usually happens within a few minutes of markets closing, though in theory it could be any time before the start of the earnings call at 10pm.

Breaking: Nvidia results beat on earnings and revenue

Nvidia’s results for Q2 are in, and the headline figures are: non-GAAP earnings per share (EPS) of $1.05 and revenue of $46.74 billion.

That’s above expectations on both fronts.

Nvidia stock plummets despite earnings beat

Despite beating on earnings and revenue Nvidia's share price has fallen by more than 3% in after-hours trading following the publication of these results.

It's of course hard to say for certain what has spooked investors, but the CFO commentary mentions that no H20 chips were sold to China-based customers during the second quarter. China sales were expected to be an area of focus ahead of the results, so this could have come as a shock to the market.

Nvidia misses data centre revenue expectations

As well as the big question mark over China sales, Nvidia has also missed expectations on data centre revenue during Q2. This came in at $41.1 billion compared to an expected $41.2 billion.

It may seem an insignificant difference, but this segment is Nvidia's growth engine, the bit that feeds directly into the AI boom that the markets are so hyped about. Investors are used to Nvidia surprising positively here. Any miss is a significant blow.

Nvidia's share price is fluctuating wildly, but still well below its level at close of regular trading.

Nvidia's Q3 revenue guidance

One obvious positive from the results is a very strong revenue guidance for Q3, which is expected to be $54.0 billion, plus or minus 2%. Analysts had been expecting guidance of around $53 billion.

That figure also assumes no H20 shipments to China, so it is to that extent conservative.

Nvidia has also approved $60 billion of share buybacks. All in all these are positive headline figures, but the negative reaction underscores the extent to which Nvidia's pricing leaves very little room for anything but perfection.

As always, an intriguing set of results from Nvidia. We're going to leave live coverage there for now. Join us tomorrow morning for rolling analysis, as we pick through the implications of these results as well as management's comments during the earnings call.

Nvidia shares fall 2.7% after mixed set of results

Good morning, and welcome back to live coverage following Nvidia's Q2 results.

A quick recap of the headlines before we dive into the analysis throughout the day: Nvidia beat on earnings ($1.05 per share versus $1.01 expected) and revenue ($46.74 billion versus $46.05 billion expected).

Nvidia's shares, though, have fallen 2.7% in overnight trading. The company missed on revenue from its key data centre segment, which came in at $41.1 billion versus expectations of $41.2 billion.

Keep following throughout the day as we bring you the latest analysis and reaction.

"Look through the noise": experts hail Nvidia's strong results

On most metrics, Nvidia's results last night marked another strong quarter for the company. In many respects, the share price dip seems an overreaction to a small miss in data centre revenue.

"Nvidia delivered another robust quarter after the bell beating [Wall] Street estimates on the top and bottom-lines again," said Dan Ives, head of global technology research at Wedbush Securities.

"Smart investors will look through the noise," said Matt Britzman, senior equity analyst at Hargreaves Lansdown. "Nvidia has traded flat or down after results in four of the past five quarters, only to do all the heavy lifting after markets have had time to digest the results."

Nvidia's growth curve is flattening

Nvidia's revenue of $46.7 billion marked a 56% increase from a year ago. Lots of companies, particularly large, established ones, would be delighted with these kinds of year-on-year growth rates.

But Deutsche Bank analysts point out that this is well below the rates of growth that investors have become accustomed to: "a clear deceleration from the growth numbers of recent years, when year-on-year sales growth had peaked above 200%", says Jim Reid, global head of macro research and thematic strategy at Deutsche Bank.

"Nvidia’s share price fell in after-hours trading, as their results added to the sense that the explosive growth seen during the AI boom of 2023-24 was decelerating," Reid added.

Nvidia's revenue growth chart

Here's an update to that revenue growth chart for Nvidia in light of last night's results.

Interestingly (and neatly) the $54 billion revenue the company has guided for next quarter implies 54% year-on-year growth, which would be a slight uptick on what the company achieved in Q2. And that figure assumes no China revenue.

On paper, it looks like quite an ambitious forecast, but Nvidia does have a track record of meeting lofty expectations. If China revenue comes into the mix in the meantime, there could be room for a positive surprise.

If not, the chip giant's growth curve does appear to be flattening out.

Markets muted following Nvidia results

Major stock markets have made a muted start this morning. The FTSE 100 opened slightly higher but has fallen by over 0.3% as of approximately 10.45am.

“The main story capturing attention comes from the biggest company in the world, as Nvidia released its latest results last night,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Shares have held onto overnight losses, despite an upbeat earnings call.”

S&P 500 futures are up around 0.05% this morning, suggesting the flagship index will also make a subdued start to the day.

Nvidia’s results highlight the dangers of high expectations

Shares are priced according to market expectations. The higher these reach, the easier it is to disappoint, and expectations around Nvidia have been higher than those for just about any other company for years.

As such, Nvidia’s share price dip following its results “wasn’t about failure”, according to Kate Leaman, chief market analyst at AvaTrade. “Rather, it was about expectations.

“With options traders pricing in a 6% swing, anything short of perfect was going to invite second-guessing,” Leaman added.

It’s a moment for investors to reflect rather than to tear up the playbook, though. “The big picture is still intact. Nvidia’s results support the idea that AI infrastructure is the next long-term growth engine,” says Leaman. “But it also reminded the market of something important: dominance comes with pressure.

“When you're leading the AI revolution, every quarter isn’t just about results, but also about keeping the entire ecosystem believing in your story.”

Wedbush reiterates Nvidia price target following results

Wedbush Securities has reiterated an Outperform rating for Nvidia's stock following last night's results, which Matt Bryson, Matt Bryson, managing director, equity research at the firm describes as "almost ubiquitously positive".

The firm's price target is unchanged at $210, implying 16.9% upside from yesterday's closing price (prior to the results' announcement).

Sovereign AI is a major tailwind for Nvidia

Nvidia’s CFO, Colette Kress, said during the earnings call that followed Nvidia’s results yesterday that the European Union has committed to investing €20 billion into 20 AI factories across France, Germany, Italy and Spain.

“We think Nvidia [will capture] the lion’s share of [this] spend,” said Nancy Tengler, CEO and CIO at Laffer Tengler Investments, “if for no other reason than it is the 'known player,' and countries need to know with whom they're partnering.”

Indeed, according to Kress, Nvidia stands to generate $20 billion in sovereign AI revenue this year.

Nvidia’s revenue results compared to guidance

Historically, Nvidia’s share price has gained following its results in part thanks to management posting conservative revenue guidance when it announces results. This means revenue tends to surprise to the upside.

“Over the last few years, Nvidia management has baked about $2 billion in sales conservatism into every quarterly outlook,” says Matt Bryson, managing director, equity research at Wedbush Securities. “We don't see why the October quarter will prove any different.”

Given that Nvidia guided for $54 billion revenue next quarter, that could translate to $56 billion when the results eventually come around – even without an uplift from the China market. It would imply 20% quarter-over-quarter revenue growth and 60% growth year-over-year, which would be good going for a company of Nvidia’s size.

“I’m pleased with Nvidia’s quarterly results and particularly with the company’s revenue guidance,” said Paul Meeks, managing director and head of technology research at Freedom Capital. “The stock was probably just up too much too fast from its ‘Liberation Day’ bottom ($97) to hold its momentum after this report.”

Meeks says that he wants more clarification on sales to China but that could be dependent on the outcome of trade negotiations between Beijing and Washington DC, which could take months.

“In the meantime, I'm happy to hold Nvidia,” Meeks adds.

Will Nvidia's sales to China return?

Further down the line, perhaps as a result of a comprehensive US-China trade deal, Nvidia might be able to get its exports to China back on track.

"I think we'll eventually get a deal with China," says Paul Meeks, managing director at Freedom Capital Markets. "Even if Nvidia can’t sell, or the Chinese don’t want, the H20 chip, I believe Trump’s broader package will include leeway for Nvidia and AMD to ship next-gen chips.

"These would be the higher-margin products, though slightly “dumbed down” compared to what’s sold in the US."

On that basis, Meeks would consider Nvidia a buy should the stock pull back significantly at any point prior to a deal being struck.

On that note, Nvidia's shares are down 1.2% in today's trading so far - representing an uptick in sentiment following the declines that happened during after-hours trading, as the change is measured from yesterday's close.

Thanks for following along with Nvidia's results here with us. We're going to end rolling coverage for now. Join us again in three months for the next instalment.

Summary

• Inflation rose to 3.8% in July, up from 3.6% in June, according to figures published by the Office for National Statistics (ONS) this morning. It means inflation is at its highest level since January 2024.
• The largest upward contribution to the inflation jump came from the transport division, particularly airfares.
• Longer term, Bank of England forecasts suggest inflation will peak at 4% in September before gradually falling back towards the 2% target by 2027.
• The Bank of England’s governor Andrew Bailey recently told the BBC that although the path for interest rates is still downwards, the course is now “a bit more uncertain” given ongoing inflationary pressures.
• The Bank cut interest rates to 4% on 7 August in a knife-edge decision that required two votes before reaching a 5-4 verdict. The close split has caused investors and economists to adjust their interest rate expectations going forward.
• Most experts now expect a maximum of one more interest rate cut before the end of the year.

| What is inflation? | CPI versus RPI inflation | When will interest rates fall further? | CPI inflation release dates | Bank of England meeting dates |

What to expect from tomorrow’s inflation report

Good afternoon and welcome to our inflation live coverage.

Households should brace themselves for another jump when July’s inflation report is published at 7.00am tomorrow. The Bank of England expects the headline inflation figure to jump to 3.8%, up from 3.6% in June.

Economists at Deutsche Bank are also expecting a 0.2 percentage-point jump compared to last month’s reading. Meanwhile, research firm Pantheon Macroeconomics is expecting a slightly smaller increase, bringing inflation to 3.7%.

Stick with us as we bring you the latest news and analysis, both in the lead-up and aftermath.

What’s driving price increases?

Summer spending could be partly responsible, if inflation jumps to 3.8% as expected tomorrow.

“There’s likely to be more upside in services momentum, particularly around airfares and accommodation prices, with the former supported by the timing of school holidays and the latter potentially flattered by an Oasis-related bump higher,” said Sanjay Raja, chief UK economist at Deutsche Bank.

Food inflation has also been adding pressure in recent months. Extreme weather has impacted harvests and higher employment costs are also pushing prices up.

“We expect food inflation to continue its ascent – but we do think we may be nearing the peak,” Raja said.

Inflation “much hotter than government and Bank of England would like”

Although inflation has slowed considerably from its peak of 11.1% in October 2022, it remains elevated. Victoria Scholar, head of investment at the platform Interactive Investor, points out that it is “much hotter” than both chancellor Rachel Reeves and the Bank of England would like.

This was reflected at the Bank’s latest rate-setting meeting, when policymakers voted to cut rates by a narrow 5-4 majority. Two votes were required before that verdict was reached. Commentators had been expecting a more decisive vote and, as a result, some have dialled down the tone of their forecasts going forward.

“Although we still expect another 25 basis-point cut in November, our call is made with much less confidence,” said Andrew Goodwin, chief UK economist at Oxford Economics.

“We think it wouldn't take much to convince the committee to pause for longer before cutting again. If inflation continues to surprise to the upside, this could tip the balance towards no change, particularly if market pricing moves against a rate cut.”

What does rising inflation mean for your money?

At the basic level, rising prices means the cost of everyday goods and services is going up, stretching household budgets. This could prove challenging if your income isn’t rising at the same pace.

Although annual wage growth remains high, coming in at 5% in the latest labour market report, it is starting to slow as the jobs market cools. Survey data from the Office for National Statistics suggests businesses have been pausing hiring decisions, with some opting not to recruit new workers or replace those who have left.

“While workers may take comfort in the fact that pre-tax incomes are still growing faster than inflation for now… this is offset by a heavier tax burden and the risk that wage growth could slow further from here,” said Alice Haine, personal finance analyst at investment platform Bestinvest.

“With uncertainty around the timing of future rate cuts and businesses adopting more cautious hiring strategies – or turning to AI to plug skills gaps – consumers would be wise to adopt a prudent approach to expenditure,” she added.

Of course, it is not just household budgets that inflation impacts, but other areas of your finances like savings and investments too. More on that in our next post.

What would another inflation jump mean for savers?

Rising inflation is bad news for those with cash savings, particularly when coupled with interest rate cuts. Inflation erodes the real value of cash, as the pound in your pocket doesn’t go so far when the cost of goods and services goes up.

To protect your savings against inflation, make sure the interest rate on your savings account keeps pace with inflation, at the very least. Ideally, you should look to beat it. The top easy-access savings accounts are currently offering rates of up to 5%. Even if inflation jumps to 3.8% tomorrow, that means you can still earn a real return of 1.2%.

If you are happy to lock up your cash for a year or so, it could make sense to fix your savings to lock in higher rates for longer. Easy-access accounts tend to have variable rates that can drop with little or no notice, while fixed-rate accounts offer more certainty. The top one-year fixed-rate account with no minimum deposit requirement currently pays 4.25%, according to comparison site Moneyfacts.

Can investing help you beat inflation?

If you are looking to beat inflation over the long term, you might want to consider investing a portion of your savings in a diversified portfolio of stocks, bonds and other assets.

There are some caveats – for example, you should be willing to keep the money invested for a minimum of five years to ride out short-term volatility. Before investing, you should also make sure you have paid off any high-interest debts and put aside enough cash to cover emergencies and any short-term savings goals.

While investing exposes you to market risk, stocks typically outperform cash over the long run and have a better track record when it comes to beating inflation.

Data from Barclays looking back over the past 120 years or so shows that equities have outperformed cash 70% of the time, based on a two-year holding period. If you extend the holding period to 10 years, it rises to 91% of the time.

It is important to invest sensibly across a diversified range of opportunities rather than putting all of your eggs in one basket. If you don’t feel confident picking your own investments, a ready-made fund could be a good option.

Our beginner’s guide shares some useful tips for those who are thinking about investing for the first time.

Rising inflation worsens the impact of fiscal drag

Rising inflation is bad news when it comes to taxes. Personal tax thresholds have been frozen since 2021, meaning more taxpayers are finding themselves in a higher tax bracket as inflation-related wage increases push them over the line.

Inflation also erodes the value of the tax-free personal allowance – the amount of income you do not need to pay tax on. This has been frozen at £12,570 since 2021.

This effect is known as fiscal drag. Critics often call it a stealth tax, as it causes income tax bills to go up, even when rates are left unchanged.

“Frozen tax thresholds affect everyone. With the personal allowance and higher-rate threshold frozen until 2028, this means that even lower earners will gradually pay tax on more of their income,” said Craig Rickman, personal finance expert at Interactive Investor.

“The noise around fiscal drag is likely to crank up over the coming months as the Autumn Budget heaves into sight. With the government at risk of missing its narrow, iron-clad fiscal rules, tax hikes could be in the offing.”

Rickman added that extending the freeze on tax thresholds beyond 2028 is “a way for the government to raise billions of pounds without technically breaking its manifesto promise not to raise taxes on working people”.

How are investors responding to rising inflation?

Although inflation is expected to hit 4% later this year in September, interest rates have been coming down. A falling interest rate environment can encourage savers to invest their money, as cash returns start to look less attractive when savings rates drop.

Despite this, the investment environment remains complex, according to Charlie Ambler, co-chief investment officer at wealth management firm Saltus.

“While rate cuts should disincentivise saving, rising inflation and the prospect of further tax rises in the autumn are forcing investors to exercise a degree of caution. With economic growth slowing to 0.3% between April and June, policymakers must reassure investors and boost confidence in the economy in order to unlock growth,” he said.

“There are undoubtedly opportunities in interest rate sensitive sectors and UK equities, but we are seeing investors adopt a patient, disciplined approach with a focus on long-term returns.”

Join us tomorrow morning

Thank you for following our preview analysis this afternoon. We will be back tomorrow morning, just before July's inflation report is published at 7.00am. To recap, here is what is expected:

• The rate of inflation is expected to jump again tomorrow, potentially hitting 3.8%.
• This would mark a 0.2 percentage-point increase compared to June’s reading of 3.6%.
• Summer spending could be partly responsible for the rise, including higher airfares and accommodation prices. Food prices have also been adding pressure in recent months, and this trend could continue in tomorrow’s report.

The Bank of England will also be keeping a close eye on core and services inflation to get a sense of how embedded inflationary pressures are in the economy:

• Core inflation strips out categories that tend to see short, sharp fluctuations in prices, like food and energy.
• Services inflation covers things like hotel stays, airfares, educational costs and more. Services make up around 80% of the UK economy, so this is an important measure.
• Core inflation is expected to hold steady at around 3.7% tomorrow, according to Deutsche Bank, while services inflation could creep up to 4.9% (compared to 4.7% in June).

All of this has important implications for household budgets and the Bank of England’s interest rate decisions – which in turn impact things like savings rates and mortgage rates. Join us tomorrow as we share the latest news and analysis.

Welcome back – 15 minutes to go

Good morning and welcome back to our live report. In 15 minutes, the Office for National Statistics (ONS) will publish July’s inflation figure. It is expected to show another jump to 3.8%, which would be the highest reading since January 2024.

Stick with us for the latest news, plus what it means for your finances.

Patience could be required from investors when it comes to inflation

Although investors won’t be delighted if inflation jumps again this morning, patience could be required, according to Michael Field, chief equity strategist at investment firm Morningstar.

“Economists have previously warned that we could be dealing with elevated levels of inflation for a transitory period,” he said.

“We believe this is how the Bank of England will view the situation when making upcoming decisions on interest rate levels. Interest rates in the UK are the highest in the western world, so the bank has plenty of room for manoeuvre, even with elevated inflation in the short term.”

Field points out that UK equity markets are trading at all time-highs. “While inflation remains somewhat concerning, the effect of lower interest rates feeding through the economy should only add weight to investor confidence.”

BREAKING: Inflation jumps to highest in 18 months

UK inflation hit 3.8% in July, up from 3.6% in June, in line with analysts' expectations.

What drove the inflation jump?

The largest upward contribution to the jump in inflation came from the transport sector, particularly airfares. Economists had foreseen this heading into today's report.

Commenting earlier this week, Sanjay Raja, Deutsche Bank's chief UK economist, said: “There’s likely to be more upside in services momentum, particularly around airfares and accommodation prices, with the former supported by the timing of school holidays and the latter potentially flattered by an Oasis-related bump higher.”

Transport costs up 3.2% as airfares took off

Transport costs rose by 3.2% on an annual basis in July, up from 1.7% in the previous report. As introduced previously, airfares were largely responsible as prices soared in the busy summer period.

Airfares jumped by 30.2% on a monthly basis – the largest July increase since records began in 2001.

Petrol prices also pushed inflation higher

Motor fuels also added pressure to inflation in the latest report, with the average price of petrol rising by 2 pence per litre between June and July 2025. This compares to a drop of 1.4 pence per litre between June and July 2024.

Diesel prices were up 2.9 pence per litre over the same period, versus 1.1 pence per litre a year ago.

Despite experiencing a bigger monthly jump this July than last, fuel is still cheaper than it was a year ago. A litre of petrol now costs 133.9 pence on average, versus 144.4 pence a year ago. Diesel costs 141.4 pence, down from 150.4 pence a year ago.

Although fuel prices are volatile, the overall trend has been a downward one after prices peaked in late 2022 during the energy crisis.

Rachel Reeves: "More to do to ease the cost of living"

Today's inflation jump was not unexpected, but it will still come as bad news to chancellor Rachel Reeves. It creates an even more challenging backdrop in the lead-up to her Autumn Budget, where tax hikes are widely expected.

Responding to this morning's report, Reeves said: “We have taken the decisions needed to stabilise the public finances, and we’re a long way from the double-digit inflation we saw under the previous government, but there’s more to do to ease the cost of living.

“That’s why we’ve raised the minimum wage, extended the £3 bus fare cap, expanded free school meals to over half a million more children, and are rolling out free breakfast clubs for every child in the country. Through our Plan for Change we’re going further and faster to put more money in people's pockets.”

Larger-than-expected jumps in core and services inflation could create concern

Core and services inflation both jumped in July – and by more than some economists were expecting.

Core inflation strips out categories that tend to see short, sharp fluctuations in prices, like food and energy. Meanwhile, services inflation covers things like hotel stays, airfares, educational costs and more. Services make up around 80% of the UK economy, so this is an important measure.

Core inflation rose from 3.7% to 3.8% on an annual basis in July, while services inflation rose from 4.7% to 5%. For comparison, economists at Deutsche Bank had been forecasting readings of 3.7% and 4.9% respectively, meaning both figures came in slightly higher than they were expecting.

Some will be wondering whether the recent increase in employment costs is having an impact on services inflation. Businesses warned this could happen after a higher minimum wage and higher payroll taxes kicked in from April this year. Many said they would look to offset some of these costs by increasing their prices.

"Increasing services inflation suggests that rising National Insurance and National Living Wage costs are exacerbating underlying price pressures by more than offsetting the current downward squeeze from looser labour market conditions," said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.

Food prices accelerate again

Higher food prices have been adding pressure to inflation in recent months, and prices accelerated again in July.

The cost of food and non-alcoholic beverages rose by 4.9% on an annual basis, up from 4.5% in the previous report.

The Office for National Statistics points out that this is the fourth consecutive increase and the highest rate recorded since February 2024. Despite this, the rate of food inflation remains below the peak seen in early 2023.

On a monthly basis, the cost of food and non-alcoholic beverages rose by 0.4%.

Some of the items contributing to higher food inflation in July were meat (mainly beef), sugar, jam, honey, syrups, chocolate and confectionary, coffee, tea, cocoa, mineral waters, soft drinks and juices (mainly fresh orange juice).

Higher inflation could be bad news for mortgage rates

Those who are looking to take out a mortgage (or refinance after the end of a fixed-rate period) will be disappointed by today's inflation jump. With inflation high and rising, the Bank of England could be more cautious when it comes to future interest rate cuts. That certainly seemed to be the tone of its last meeting on 7 August, when a rate cut was only narrowly voted through by a 5-4 majority.

David Hollingworth, associate director at broker L&C Mortgages, says that mortgage borrowers have recently been enjoying a market where rates have been dropping, but these reductions "have tended to come in small increments".

"We could see that slow further or even reverse in some cases if the market reacts badly to the threat of higher inflation than was previously expected," he explains.

"Borrowers holding out for more cuts may want to keep close tabs on mortgage rates. It’s far from doom and gloom but securing a rate now will protect against any turnaround while still allowing for a review before completion, if there are further improvements."

Upcoming reports will be important for pensioners, with implications for triple lock

Every inflation report feels significant at the moment given recent economic volatility, but the next few months could be particularly important if you are a pensioner.

September's inflation report (published in October) and next month's wage growth report (covering May-July) will be used when calculating how much state pension you receive.

Each year, state pension payments are increased in line with the triple lock rules. This means pensioners see this portion of their income rise in line with inflation, wage growth, or by 2.5% – whichever is highest.

The Bank of England currently expects inflation to hit 4% in September, the all-important month for pensioners. Wage growth is currently slightly higher than this at 4.6% (including bonuses), although it could shift slightly in next month's report.

"Wage growth has been drifting down, but it seems likely we will see a state pension increase somewhere in the 4-4.5% ballpark for next year. This would give someone on a new state pension an uplift somewhere around £479-538 per year. Someone on a full basic state pension would see that portion of their income rise by between £367-£413," said Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.

"These increases would be much smaller than the huge boosts we’ve seen in recent years, but they will be welcome nonetheless. The increase won’t be implemented until April 2026 and it’s to be hoped that inflation will have dipped significantly by that point, so it should give a bit more breathing space to pensioner budgets that have been sorely stretched."

Does today’s inflation print look worse than it is?

Although today’s jump takes inflation to its highest level in 18 months, several experts point out that some of the drivers are short term in nature.

“Services inflation rose slightly but the root cause was holiday expenditure: airline prices jumping as school holidays started, and hotels and restaurants no doubt reflecting the same,” said Michael Browne, investment strategist at Franklin Templeton, the asset management firm, “The comment in the MPC report that even the Hawks think this is short term, has not received enough scrutiny.”

Others point out that the Oasis reunion tour may have contributed to higher hotel and restaurant costs too, with prices in this category rising by 3.4% on an annual basis in July, up from 2.6% the month before.

Annual house price inflation is 3.7%

Each month on inflation day, HM Land Registry also publishes a report on how much house prices have gone up or down over the past year. Official house price data is published with a six-week time lag, meaning today's report covers the year to June (rather than July, which is the month covered in the latest CPI report).

UK house prices rose by 3.7% over this time period, bringing the average property to £269,000 – around £9,000 higher than a year ago. On a monthly basis, prices rose by 1.4%.

Remortgaging this year? Here’s what today’s economic environment means for you

For the reasons explored in a previous post, today’s inflation jump may come as bad news for those shopping around for a new mortgage deal. Given inflation is high and rising, many expect the Bank of England to slow down the pace of rate cuts – which could mean mortgage rates stall.

That said, there is some good news for those who are looking to refinance over the coming months as they come to the end of a two-year fix.

The average two-year fixed rate is currently 4.98%, according to comparison site Moneyfacts. This is considerably cheaper than this time two years ago. At its peak in August 2023, the average two-year rate was 6.85%.

For someone borrowing £400,000 over a 25-year mortgage term, this drop in rates equates to a £455 drop in monthly repayments.

Things don’t look quite so good for those coming to the end of a relatively cheap five-year deal agreed before rates started rising in 2021. Their monthly repayments are likely to jump when they refinance.

Moneyfacts: Fewer than half of savings accounts beat inflation

Data from comparison site Moneyfacts shows that fewer than half of available savings accounts now beat inflation. Savers have been hit by a double whammy of rising inflation and falling interest rates in recent months.

Of the 2,004 savings accounts currently available on the market, just 956 beat inflation. This has fallen from 1,558 inflation-beating deals a year ago (August 2024).

"After almost a year and a half of savings growth, many savers are slipping back into earning negative real returns as inflation figures jump again," said Caitlyn Eastell, a Moneyfacts spokesperson.

"With inflation running higher than the interest savings earn, money left languishing in a low-interest account is losing its spending power – making it tougher to achieve a sense of financial resilience or save towards goals."

This highlights the importance of shopping around for the best deal. Some of the top accounts are still paying around 5%, but savers should act sooner rather than later to boost their chances of earning a real return.

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.

Where is inflation heading next?

Inflation is expected to pick up over the next couple of months, peaking at 4% in September, according to the Bank of England. Recent increases have been driven by higher food prices, energy prices and increases in some regulated prices like water bills earlier this year.

There has also been some uncertainty arising from global developments, including changes in trade policy led by US president Donald Trump. “While recent trade agreements mean there is less uncertainty than earlier in the year, we continue to watch closely what this could mean for UK inflation,” the Bank of England said.

Some commentators think higher UK employment costs may also have added pressure in recent months, after the minimum wage and payroll taxes went up in April. Businesses previously warned they might look to raise prices to offset the cost. Economists will be keeping a close eye on how this develops over the coming months.

While inflation has been rising so far this year, the Bank of England still thinks the underlying disinflationary trend is intact. After peaking in September, the Bank expects inflation to gradually fall back towards the 2% target, finally reaching it in the second quarter of 2027.

That concludes our inflation live coverage for this month. Thank you for joining us. Here is a list of upcoming CPI dates, covering the remainder of 2025:

• 17 September (covering August)
• 22 October (covering September)
• 19 November (covering October)
• 17 December (covering November)
• 21 January 2026 (covering December)

We will be back with further analysis then.

Summary

• The Bank of England’s Monetary Policy Committee (MPC) has announced a 25 basis point cut to UK interest rates, as widely predicted
• Committee voted 5-4 in favour of the cut
• Four members voted to hold rates unchanged, while one (Alan Taylor) voted for a 50 basis point cut
• Inflation spiked to 3.6% in June, well ahead of the Bank of England’s 2% target
• Weakness in the UK economy prompted the MPC to stick to its rate-cutting schedule
• In June, the MPC voted 6-3 in favour of holding rates unchanged, as opposed to a 25 basis point cut

| When will interest rates fall further? | Inflation latest | MPC meeting dates |

Good afternoon, and welcome to our live coverage of the upcoming interest rates decision.

The Bank of England’s Monetary Policy Committee (MPC) announces its latest decision tomorrow (Thursday 7 August) at midday, and is generally expected to cut the headline rate by 25 basis points, to 4%.

That might seem unusual, given that inflation rose to 3.6% in June: well above the 2% inflation rate that the Bank of England targets.

We’ll go through the reasons why experts on the whole believe that the MPC will cut interest rates tomorrow in spite of persistent inflation, as well as explaining what an interest cut would mean for you and your money. Keep following our rolling coverage for all the details.

The MPC’s interest rate cut cadence

Markets tend to like certainty. One way in which the MPC can foster this is by being as predictable as possible in its actions. Central bankers tend to avoid surprising markets as much as possible.

So far this year, the MPC has stuck to one 25 basis point cut per quarter. It has signalled that it intends to keep doing so.

“On a very simplistic measure of Bank behaviour, it’s time for a cut,” says Laith Khalaf, head of investment analysis at AJ Bell. “The Bank of England has been metronomic in its activity during this rate-cutting cycle, with base rate getting chopped back every three months since last August.

“This fits in with the ‘gradual and careful’ narrative expounded by the Bank. One year on from that first rate cut, the steady drum beat of the rate-cutting cycle demands another thump.”

Markets are pricing in a rate cut of 25 basis points, explains Khalaf. Anything besides this – either holding rates where they are, or cutting them by 50 basis points – would come as a shock and could provoke a backlash in the bond market.

Inflation: the background to the MPC’s interest rates decision

Monetary policy is inextricably tied to inflation. The Bank of England (BoE) targets an inflation rate of 2%, which is widely regarded by economists as optimal for economic stability, and interest rate changes are the primary lever it can use to influence inflation.

The usual logic dictates that interest rates should be increased if inflation is running substantially above 2% or (importantly) if the BoE expects inflation to rise in the foreseeable future. In theory, this prompts people to spend less and save more, reducing demand for goods and services, and thereby slowing the pace of price increases.

Some might argue that, given inflation has risen to 3.6% in recent months, the MPC wouldn’t normally be thinking about cutting rates.

It might usually be expected to hold rates steady with inflation rising to its current level. In a strong, fast-growing economy, it might even be thinking about hiking rates, to prevent inflation accelerating.

But inflation is not the BoE’s only concern. It also has to consider the health of the economy – which is usually boosted by interest rate cuts.

For various reasons, which we will cover in detail here, experts think the BoE will err on the side of spurring economic growth rather than controlling inflation at tomorrow’s interest rates announcement.

“We’d expect the Bank to cut rates this month but offer very little in terms of forward guidance, besides reiterating its bias for further ‘gradual’ and ‘careful’ cuts,” says James Smith, developed markets economist, UK at ING.

Why the inflation outlook could be key to MPC’s base rate decision

When the MPC sets interest rates, it looks forwards as well as backwards. The Bank of England’s inflation forecasts are a key input in its decision-making.

While June inflation’s jump to 3.6% was above the Bank’s forecast of 3.4%, it wasn’t substantially more than expected, and crucially it is in line with the Bank’s broader forecast that inflation will peak at 3.7% during Q3 this year (probably in September).

From then, inflation (which is measured year-over-year, so compares prices in any given month to the same month the previous year) is expected to fall.

Several inflationary shocks took place during the first half of 2025, especially Trump’s tariffs and increased payroll taxes and minimum wage levels that came into effect in April.

These are now, effectively, working their way through the system, but the MPC expects their impact to dwindle through the end of 2025 and first half of 2026. According to its latest Monetary Policy Report, the Bank expects inflation to fall to 2.4% by Q2 2026, and to 1.9% a year later.

“Importantly, the Bank of England’s previous forecasts show inflation rising over the course of this year before falling back,” says Laith Khalaf, head of investment analysis at AJ Bell. “So prices are currently evolving broadly in line with what the Bank has been expecting.”

For that reason, high levels of inflation are not – at present – enough of a concern for the MPC to deviate from its rate-cut cadence.

UK's weakening economy makes an interest rate cut more likely

While inflationary pressures are expected to subside, the UK economy is stagnating. Relatively high interest rates are exacerbating this.

The UK economy shrunk for the second consecutive month in May, while unemployment climbed to a four-year high.

“The economy is likely to face persistent headwinds,” says Michael Saunders, former MPC rate-setter and senior economic advisor at Oxford Economics. “Trade policy uncertainty remains high, deterring investment and hiring.”

With this in mind, Saunders expects that the MPC is likely to cut rates later this year, and again early next year. He anticipates that rates could even fall as low as 3.25% by mid-2026.

How did the MPC vote at its last meeting?

The Monetary Policy Committee (MPC) is a working group of nine members, each of whom votes on interest rates at each meeting.

At the last meeting, three of the nine – Swati Dhingra, Dave Ramsden and Alan Taylor – voted to cut interest rates to 4.00%. The remaining six voted to keep them unchanged at 4.25%.

^{Source: Bank of England}

James Smith, developed markets economist, UK at ING, thinks that we could see a rare three-way split at tomorrow’s announcement.

“At least one official – Catherine Mann – is likely to vote for no change,” says Smith, adding that she could be joined by Huw Pill and Megan Greene.

“At the opposite end of the spectrum, arch-dove Swati Dhingra is likely to vote for a larger 50 basis point cut,” says Smith. “Fellow dove Alan Taylor might be tempted to join her, though he recently said he’d like to see three more cuts this year, which tends to suggest he’ll vote for 25bp moves at each meeting.”

Smith's guess is that seven members will vote for a 25 basis point cut, with one "dissenter" voting in each alternative direction (for no change on the one hand, and a 50 basis point cut on the other).

When will the MPC announce its interest rate decision?

As a reminder, the Monetary Policy Committee’s (MPC) base rate decision will be announced tomorrow (Thursday 7 August) at 12pm.

Read our explainer for more information on future MPC meeting dates.

That concludes today's coverage, but we'll be back tomorrow morning with more on what an interest rate cut could mean for your money. We'll also bring live updates and reaction following the MPC's announcement.

Interest rate announcement due today

Good morning, and welcome back to our rolling coverage of UK interest rates, as the Monetary Policy Committee (MPC) announces its latest base rate decision today at 12pm.

As a reminder, the expectation among economists and markets is that the MPC will cut UK interest rates by 25 basis points, to 4.00%.

We’ll look in detail this morning at what lower interest rates could mean for your money. Then, this afternoon, we’ll bring live reaction to the MPC’s decision.

Recap: economic weakness expected to prompt an interest rate cut

Central banks need to balance two separate mandates: controlling inflation, and supporting economic growth. The two are often correlated: greater growth in the economy means there is more money, which pushes costs up. In these instances, central banks increase interest rates to reduce the flow of money and the incentive to spend.

It isn’t always that simple. Sometimes inflation goes hand-in-hand with weak or negative economic growth. This perilous scenario is called stagflation, and the UK economy risks slipping towards it.

“The MPC are once again facing crosswinds in their forthcoming meeting to determine bank lending rates,” says Steve Matthews, investment director, liquidity at Canada Life Asset Management.

While remaining aware of the uplift in inflation, the MPC will likely lean towards cutting interest rates to protect the UK economy.

“With inflation still expected to return to the 2% target by 2026, we believe the MPC will continue to prioritise economic support,” said Matthews. “Markets have already fully priced in this move, and we see potential for at least one further cut by year-end.”

UK’s small businesses would welcome an interest rate cut

As we saw yesterday, weakness in the UK economy will likely steer the MPC towards a 25 basis point cut today, despite inflation running high at 3.6% in June.

One group that is feeling the pinch of economic weakness is the UK’s 5.5 million small- and medium-sized businesses (SMEs). These have been struggling against higher employment taxes, increased expenses and elevated costs of borrowing in recent years.

“As a result, business confidence has taken a hit, the jobs market has weakened, and growth is in a state of stagnation,” comments Jamie Stewart, CEO of business banking platform binq.

Stewart says that an interest rate cut would be welcome news to the UK’s SMEs, as it would reduce their costs and increase consumer spending power.

“SMEs are the backbone of the economy, employing 16.6 million people, and generating £2.8 trillion in annual turnover,” says Stewart. “If the government is serious about a plan for growth, then it starts with working with the Bank of England and businesses to make it happen.”

Annuity rates could fall along with another base rate cut

With a base rate cut on the horizon, pension incomes could fall too. That’s because changes to the Bank of England base rate can affect how much guaranteed income you get from your pension, if you buy an annuity.

Annuities are a way of turning your pension pot into a lifetime income. You buy an annuity by swapping it for your pension savings. How much income you get in return depends on annuity rates. These are linked to UK government bond yields, which are in turn linked to the Bank of England base rate.

When interest rates are low, bond yields are typically lower which means annuity rates have also tended to be lower. So a cut in interest rates could mean a fall in annuity rates. However recent cuts to the base rate haven’t rocked the annuity boat too much so far.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Annuity rates have remained robust and currently hover close to all time highs.

“Recent interest rate cuts haven’t had a huge impact on annuity rates so far as they are only one contributing factor alongside long-term gilt yields. Should we see a cut tomorrow we might see a small decrease in annuity rates over the coming weeks.

“Would-be annuitants will be watching expectations for further rate cuts closely and the prospect of more coming down the line may encourage them to secure a guaranteed income sooner rather than later.”

Mortgage rates have fallen with interest rate cuts

Interest rate cuts are typically good news for borrowers, bad news for savers.

There have, so far, been 0.75% in cuts to UK interest rates since last August, with the expectation that will rise to 1.00% today. Data from Moneyfactscompare.co.uk shows that mortgage holders have benefitted from these cuts, with the average standard variable rate (SVR) having fallen 0.74% since the start of August 2024.

"The continuation of falling mortgage rates will instil a sense of confidence among borrowers," said Rachel Springall, Finance Expert at Moneyfactscompare.co.uk.

"There remains a clear financial gain for borrowers to shift from a variable rate mortgage onto a cheaper fixed rate, as a typical mortgage borrower being charged the current average SVR of 7.42% would be paying £372 more per month, compared to a typical two-year fixed rate," she adds.

What do you think will happen to UK interest rates?

We’re around an hour away from the MPC’s interest rate announcement. We want to hear from you – what do you think the decision will be?

What could a rate cut mean for your savings?

With most analysts expecting the MPC to vote to cut interest rates today, some savers will be concerned that the relatively high savings rates that they’ve enjoyed over the past few years could be coming to an end.

While an interest rate cut could mean more money staying in your pocket as you pay less for your mortgage, it can also be a blow for your cash savings.

The average rate of interest across all types of savings accounts is currently 3.5%, according to Moneyfacts, rising to 5.1% for the best savings account on the market.

If a base rate cut is imposed today, we can expect that these savings rates will fall in line with the MPC’s decision.

This could present a good opportunity for savers to take a look at their savings accounts and make sure their money is working hard for them.

Derek Sprawling, head of money at Spring by Paragon Bank, says a base rate cut is “a timely reminder for savers to scrutinise the value they’re getting from their savings accounts, particularly those offered by high street banks.”

He notes that many savings accounts on the market have “strings attached” like withdrawal limits or tiered rates.

Sprawling adds that “worse yet, the average rate offered on these ‘true’ easy access accounts by the big high street lenders will be less than 1.5%.”

“A Base Rate cut often triggers a ripple effect across savings segments. I urge savers to take stock of their current accounts and ensure they’re not being short-changed – especially when better, unrestricted options are available.”

GBP could be in a “lose-lose situation”, whatever happens to UK interest rates

Interest rate decisions can sometimes impact foreign exchange rates. While a 25 basis point cut is priced in by the market, that decision would be unlikely to move GBP in its own right if it is confirmed, says George Vessey, lead FX & macro strategist at cross border payments platform Convera.

“Sterling’s reaction may be muted,” he says, but he warns that the balance of risk may be tilted to the downside whatever happens.

“If the Bank sticks to quarterly 25bp cuts, current market expectations – just 60bp of easing by February – look too shallow. That leaves room for more cuts to be priced in, weighing on the pound,” he says.

“Conversely, if the BoE turns hawkish in response to sticky inflation within a stagflationary backdrop, sterling could still come under pressure. Higher nominal rates may not lift real yields if inflation expectations stay elevated and growth weakens, reducing the appeal of UK assets.

“The bottom line is, the pound may be looking at a lose-lose situation here, especially against the euro,” says Vessey. He highlights, too, that GBP/USD usually falls during August.

Keep an eye on the forecast

The headline interest rate decision seems fairly likely to be a 25 basis point cut. That’s far from guaranteed, but anything else would come as something of a shock to the market.

What is harder to predict is what signals the MPC will give as far as future interest rate decisions are concerned.

George Vessey, lead FX & macro strategist at cross border payments platform Convera, isn’t expecting substantial change in the Monetary Policy Report following the latest issue, from May. “Overall, we expect the August forecasts to closely mirror May’s Monetary Policy Report, with only modest adjustments: inflation steady, GDP slightly higher on reduced tariff drag, and softer labour market projections,” he says.

But that could be accompanied by a shift in perspective and outlook from the MPC, which has so far carefully signposted its intention for ‘gradual’ cuts, equating in practice to one per quarter over the last year.

“With inflation surprising to the upside and expectations drifting higher, the MPC is unlikely to pre-commit to further easing after today’s cut,” says James Carter, portfolio manager at W1M. “Assuming further labour market softening, we would still expect cuts in November and February. However, today’s move likely marks the start of a more data-dependent phase, with policymakers watching global events closely and balancing the risk of persistent inflation against a cooling jobs market.”

Global instability, particularly the unfolding tariff situation, could have a strong bearing on the MPC’s next interest rate decision, Carter adds.

Just ten minutes to go until the MPC reveals its latest decision on UK interest rates.

BREAKING: Bank of England cuts UK interest rates by 0.25%

As widely expected, the MPC has reduced UK interest rates by 25 basis points to 4.00%. More reaction and analysis to follow shortly.

Bank of England delivers “overwhelmingly expected” interest rates cut

“As overwhelmingly expected by the forecasting community, the BoE reduced interest rates by 25bps to 4.00%,” says Patrick O’Donnell, chief investment strategist at Omnis Investments.

“Unsurprisingly, there wasn’t enough convincing macro data to warrant a change in the ‘gradual and careful’ guidance from the bank.

“We still expect a further cut from the BoE in November and a likely quicker pace of cuts into 2026 due to global factors,” adds O’Donnell.

The MPC's interest rate vote in detail

Arguably, a closer vote than many had expected.

Four MPC members (Andrew Bailey, Sarah Breeden, Swati Dhingra and Dave Ramsden) voted in favour of the proposal to reduce interest rates by 0.25 percentage points. Dhingra had been widely expected to vote for a 0.5 percentage point cut. In the event, only one member, Alan Taylor, voted for this.

Four members (Megan Greene, Clare Lombardelli, Catherine L Mann and Huw Pill) voted to hold rates unchanged.

That gave the interest rate cut a 5-4 majority.

Reeves: interest rate cut is welcome news

UK chancellor of the exchequer Rachel Reeves has responded to the Bank of England’s decision to cut interest rates.

“This fifth interest rate cut since the election is welcome news, helping bring down the cost of mortgages and loans for families and businesses,” she said.

“The stability we have brought to the public finances through our Plan for Change has helped make this possible and helped us become the fastest growing economy in the G7 in the first quarter of this year.

“We’re locking in this growth in the long run by investing over £113 billion in infrastructure, securing three major trade deals and embracing the technologies of the future – to drive up wages and improve living standards across the UK.”

Bank of England knows uncertainty isn’t going away soon

The third small interest rate cut of the year continues the MPC’s cautious approach to cutting UK interest rates. It is threading a difficult path between stagnant growth and persistent inflation. The precariousness of this balance is reflected in the 5-4 voting split among the panel.

“Despite inflation levels remaining high, this decision is in line with the Bank of England’s steady and gradual approach to loosening interest rates,” said Brad Holland, director of investment strategy at J.P. Morgan-owned Nutmeg.

“While the committee was divided, they will be well aware that recent uncertainty isn’t going away any time soon. The economic picture in the UK remains fragile, with headline inflation well above the Bank’s target and services inflation locked in a stalemate at 4.7%.”

Tariff fears are weighing on the MPC

It is clear that some members of the MPC are nervous about the prospect of inflation rising beyond current levels and projections, with four of the nine committee members voting against an interest rate cut.

The uncertain global trade situation as a result of Trump’s tariffs is exacerbating this fear.

“This wasn’t quite the dovish shout we had been expecting – the 5-4 vote on the MPC means that there is still no desire to go in hard on rate cuts,” says Chris Beauchamp, chief market analyst at IG.

“Instead the ‘gradual’ messaging remains in place, though the committee noted that the downward path of rates was still in place.”

Bank of England predicts 4% inflation in September

Here’s a key line in the summary of the MPC’s latest meeting:

“CPI inflation is forecast to increase slightly further to peak at 4.0% in September”.

That is double the Bank's target rate, and reflects and acknowledgement from the Committee that inflation has been coming in hotter than expected in recent months.

Weighed against the economic weakness that the UK is currently facing, the Committee has – just – erred towards stimulating growth over guarding against inflation. However, the summary notes:

“The timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease.” In other words, it is going to be keeping a very close eye on where inflation is going before its next interest rates decision.

Pound rises on hawkish MPC vote split

The pound surged against the dollar following the announcement of the MPC’s interest rate decision. The 25 basis point cut had already been priced in, but the narrowness of the decision came as a surprise.

“It’s the four votes to hold rates steady that caught markets off-guard,” said George Vessey, lead FX & macro strategist at cross border payment platform Convera.

“The pound jumped higher on the news, in line with surging gilt yields, as traders recalibrated expectations for further easing,” he added. “The odds of another cut in Q4 have now dropped to less than 65%, down from over 90% before the decision.”

Interest rate cut is a “pre-emptive strike” against a downturn

The MPC may be looking at what is yet to come just as much as what has already been when it comes to the economic rationale for today’s interest rate cut.

“The Bank’s Monetary Policy Committee has launched a pre-emptive strike on any economic downturn later in the year,” said Nicholas Hyett, investment manager at Wealth Club. “It remains unsaid in these minutes, but the increasing likelihood of tax hikes and/or spending cuts at the Autumn Budget has also probably played a part in this ‘finely balanced’ decision.

“Both consumers and companies could see their pockets squeezed by the taxman, and that would have knock-on effects for economic growth.”

Markets are still pricing in one more cut this year, but Hyett thinks today’s decision marks the start of a “wait and see phase”. The Bank will hope that today’s cut gives the economy the boost that it needs, without adversely affecting the inflation picture.

With interest rates falling, savers should look ahead

We’ll bring more reaction to the MPC’s vote and report later today, but let’s have a closer look at what today’s interest rate cut means for your money – starting with savings.

Savers will have already noticed a fall in their returns in the run-up to today’s announcement, with the 25 basis point cut – if not the precise vote split – having been priced in for some time.

“Easy access rates on the Hargreaves Lansdown Savings platform have fallen 20 basis points on average over the past month, and fixed terms are down 10 basis points,” says Mark Hicks, head of active savings at Hargreaves Lansdown.

Sally Conway, savings expert at Shawbrook, says that now is a good time for smart savers to look at fixing their savings rate.

"Many analysts are predicting at least one more cut this year, and possibly a slow and steady decline into 2026,” she says.

“Fixing a rate now could give you peace of mind and help protect your return if savings rates do start to fall. When the outlook’s uncertain, a bit of forward planning can go a long way."

“While the most competitive fixed terms are still very fractionally behind easy access deals, they have edged much closer, and today’s cut could see more movement,” says Hicks. “The fact that Bank of England rate cuts look set to be sluggish should mean fixed rate deals could remain robust, so if you have savings that you don’t need for a few months or longer, it makes sense to consider tying it up in a fixed rate account, so you can guarantee to hold on to today’s strong rates.”

Interest rates cut could boost UK housing market activity

While falling rates are bad news for savers, they are good news for borrowers – and that, in turn, is good news for the housing market.

“Following a period of stagnant house price growth in the wake of the end of the stamp duty holiday in April, we are expecting market activity to ramp up considerably now as more individuals and businesses take advantage of lower rates,” says Ryan Etchells, chief commercial officer at specialist property lender Together.

“The 0.25% cut to the base rate will offer blessed relief to mortgage borrowers as lenders are expected to drop their mortgage prices over the next few weeks,” Etchells adds.

Recap: UK interest rates cut by 25 basis points

To recap on the headlines from this afternoon: the Bank of England’s Monetary Policy Committee (MPC) today cut UK interest rates by 0.25 percentage points to 4.00%.

That decision was widely expected in advance of today’s announcement, but the vote split caught markets’ attention. Four members of the MPC – Megan Greene, Clare Lombardelli, Catherine L Mann and Huw Pill – voted to keep rates unchanged, with high inflation weighing against signs of a weakening economy. That gave the proposal to cut a narrow 5-4 win.

Previous assumptions that the current pace of rate cuts (one per quarter over the past year) will continue, or even accelerate next year, are coming into question.

“Markets have pushed back expectations for further rate cuts this year,” says Sanjay Raja, chief UK economist at Deutsche Bank. “The MPC is leaning more on upside inflation risks – as opposed to downside labour market risks when thinking about its calibration of monetary policy.”

Falling interest rates meet stubborn inflation: what now for cash savers?

The picture is bleak for cash savers, with interest rates falling even as inflation remains stubbornly high.

“This probably signals the end of the road for many savings accounts that currently beat inflation,” says Emma Sterland, chief financial planning officer at Evelyn Partners. “We can expect to see savings rates reduced in the coming days and weeks, leaving returns on even the best accounts only marginally positive in real terms - especially after tax.”

It may well be time for cash savers to start thinking creatively about protecting their wealth, regardless. Chancellor Rachel Reeves had been expected to reduce the cash ISA limit in a bid to encourage people to start investing, and while those plans appear to have been shelved for now, they could come back around in future.

There are various ways for savers to generate cash-like returns within their stocks and shares ISA, for example by using money market funds.

“Money market funds invest in highly liquid and low risk short-term debt instruments that pay interest such as T-bills, Floating Rate Notes, Certificates of Deposit and government and commercial bonds that are close to maturity,” says Sterland. She cautions, though, that they are one-size-fits-all solutions. “Returns will be eroded by both fund and platform costs, as well as potentially taxation, depending on where it is held.”

Sterland also suggests direct gilt purchases for more experienced investors, or discretionary portfolios such as Evelyn’s Cash and Cautious Bond strategy.

Rising inflation could boost the state pension

The MPC is now forecasting UK inflation to peak at 4% in September. That is a key month for anyone currently drawing a state pension, as it is the month at which the CPI read for the purposes of state pensions is taken.

The state pension triple lock means that state pension payments rise annually by whatever is highest out of:

• Inflation
• Average earnings growth
• 2.5%

“If the Bank of England is right about inflation, then pensioners can look forward to a rise of at least 4% in their state pension next year,” says Laith Khalaf, head of investment analysis at AJ Bell.

“It’s possible that wage growth may trump inflation, and pensioners get an even bigger bump in their income,” he adds.

That concludes our live reporting of today's interest rates decision - thank you for joining us today.

There are three more MPC meetings scheduled before the end of the year:

• 18 September
• 6 November
• 18 December

MoneyWeek will provide live reporting on all of these, so we look forward to seeing you again in September.

Summary

• Microsoft (NASDAQ:MSFT) and Meta’s (NASDAQ:META) shares both jumped after impressive earnings beats
• Meta's stock gained 12% overnight after announcing a 38% year-on-year earnings increase
• Microsoft shares surged almost 9% after announcing 24% year-on-year increase in earnings
• Those gains are enough to push Microsoft's stock to a $4 trillion+ valuation
• Wedbush Securities raised Meta share price target to $920 from $750
• Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) both posted earnings beats
• Apple stock gained 2% overnight as China sales grew 4%
• Amazon's share price fell over 7% as AWS growth lags that of rivals GCP and Azure

| Microsoft and OpenAI | AI ETFs | Apple shares |

Microsoft and Meta kick off big week of results

Good afternoon, and thanks for joining our live coverage in the run-up to Microsoft and Meta’s results tomorrow evening, followed by Amazon and Apple’s on Thursday.

Microsoft’s share price movements are the subject of intense interest on Wall Street, as the company’s market capitalisation (market cap) nears the $4 trillion threshold Nvidia became the first company to break earlier this month.

A bumper earnings release on Wednesday could send Microsoft’s shares soaring. Will it be enough to join Nvidia?

Magnificent Seven earnings season is in full swing. Follow here for rolling previews, analysis, updates and reaction.

Microsoft and Meta shares gaining ground ahead of results

Markets have been open for around twenty minutes today, and as things stand Microsoft shares are up around 0.7%, while Meta’s stock has fallen 0.2%.

During yesterday’s session, Meta’s shares gained a boost from market optimism over a US-EU trade deal, gaining 0.69%. Microsoft’s stock was 0.25% up at one point, but closed the session down 0.24%.

When do Microsoft and Meta announce their results?

Both Microsoft and Meta will announce their results this Wednesday (30 July) after US markets close. That means after 9pm UK time.

Meta’s earnings call is scheduled to start at 2pm PT, which is 10pm in the UK. Microsoft’s is scheduled to start half an hour later, at 10.30pm in the UK.

Results will be released in between the close of markets and the start of the respective earnings calls – generally, soon after markets close.

Microsoft and Meta’s shares will continue to be traded during this period in what is known as after-hours trading.

What do analysts expect from Meta and Microsoft’s results?

Analysts polled by FactSet and LSEG have the following expectations for Meta and Microsoft’s results this week:

The FactSet estimates see Meta’s revenue increasing 14.7% and earnings rising by 14.0% year-on-year.

Microsoft, meanwhile, is expected to grow revenue by 14.0% and earnings by 14.6%.

Microsoft earnings preview

Besides the headline numbers, analysts and investors will be keeping a close eye on Microsoft’s cloud revenue platform, Azure.

Azure is one of the top three cloud service platforms, alongside Magnificent Seven rivals Amazon Web Services (AWS) and Google Cloud. Cloud services like these are getting a boost from the compute demands of artificial intelligence (AI) training.

“We strongly view this as Microsoft’s ‘shining moment’ with AI set to change the cloud growth trajectory,” says Dan Ives, global head of technology research at Wedbush Securities.

Like Google, Microsoft has its own AI model, Copilot. A theme for this week’s results could be analysts watching for signs of return on these AI investments.

“Adoption [of Copilot] has been picking up, and investors want to know whether it's boosting revenue in a meaningful way,” says Lale Akoner, global market analyst at eToro. “Microsoft is spending heavily to build more AI infrastructure, so profit margins will be closely watched.”

Meta earnings preview

Like Microsoft, investors will want to see evidence that Meta’s extensive investments into AI, especially its Llama model, are yielding results.

“So far, markets have rewarded the company’s massive capex pivot, driven by custom silicon, Llama models, and expanding infrastructure, but now it’s “show me the money” time, says Lale Akoner, global market analyst at eToro.

“Reality Labs losses remain a sore spot, but are tolerable if core earnings impress,” adds Akoner. “User growth and ad pricing trends, especially outside the US, will be scrutinised closely given recent dollar strength and macro wobble in emerging markets.”

Thanks for following our reporting ahead of Microsoft and Meta's earnings. Join us again tomorrow for a full day of preview and analysis, followed by Amazon and Apple's on Thursday.

Meta stock falls and Microsoft trades flat ahead of earnings

Good morning, and welcome back to our live coverage ahead of Microsoft and Meta’s results.

Microsoft shares closed yesterday’s session just 0.01% above the previous session’s close.

Meta’s share price, meanwhile, fell 2.46% in regular trading, though some of these losses were recovered after hours.

Expect to see lots of movement in both Microsoft and Meta’s stock this evening as both companies announce their results for the most recent quarter.

When do Apple and Amazon announce their results?

Apple and Amazon will both announce their latest results tomorrow (31 July), after markets close in the US.

The results will land in between markets closing and the start of each company’s earnings call, both of which are scheduled for 2pm Pacific time (10pm BST).

During after-hours trading, both Apple and Amazon’s stock is likely to be highly volatile. Share price movements will depend initially on the reaction to how the raw numbers compare to the expectations of analysts (we’ll bring you more on those later today), as well as how each company’s management discusses them during the earnings calls.

Why the Mag7 still matter

In case investors are wondering why changes in Microsoft or Meta’s share price should interest them, it is worth remembering that the Magnificent Seven group has been outperforming the broader market for over a decade.

“It really has been a case of investors needing to keep up exposure to these companies to enhance portfolio returns,” says Daniel Casali, chief investment strategist at Evelyn Partners.

The roots of this outperformance goes back to the rise of the internet during the 1990s, mobile data in the early 2000s, and the cloud computing revolution from 2006 onwards.

“In 2025 this is reflected in their earnings forecasts,” says Casali. “For the second quarter, they are expected to post an aggregate annual earnings increase of 14%.”

Data from FactSet suggests that the S&P 500 as a whole has, by contrast, posted average year-on-year earnings growth of under 6% so far this earnings season.

When it comes to the Magnificent Seven, “their financial leadership is not just a matter of trend: it’s a structural advantage,” says Casali.

Meta’s AI spend in focus

Meta’s share price has made solid gains this year as the company is, currently, viewed as one of the winners of the AI boom. It has been successful in incorporating AI into its ad business, for example, boosting targeting, engagement and efficiency.

However, the company is spending big on developing its own AI models, and that could lead to some investor pessimism if it isn’t able to demonstrate results.

“Meta’s had some disappointing progress on its open-source language models, and it’s opening the chequebook to put things right,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown. “The creation of a new ‘superintelligence lab’ has caused quite the stir, with Meta rumoured to be dangling $100 million+ packages to poach AI talent.”

Last week, Alphabet shares fell immediately after it released its results despite strong headline numbers, with investors alarmed at its increased capital spend projections for this year.

Could we see a similar reaction in Meta’s share price this evening?

Microsoft shares are a favourite among fund managers

Microsoft’s stock has a dominant share of overall fund exposure compared to the rest of the Magnificent Seven, according to data from Morningstar, suggesting that it is a favourite of institutional investors.

Despite having been overtaken by Nvidia as the world’s most valuable company, it still edges the semiconductor giant out of top spot in terms of institutional fund holdings.

“Institutional confidence remains strong, driven by Azure’s 30% growth, deep enterprise ties, and its leading position in AI through OpenAI,” says Monika Calay, director of UK manager research at Morningstar.

Microsoft’s share of the top fund holdings has fallen by just 0.41% over the past ten years – and it has demonstrated greater consistency than any other Magnificent Seven stock during that time.

“Microsoft is the only member of the Magnificent 7 to consistently hold at least a 20% average weight in global equity portfolios every year for the past decade, a testament to its enduring institutional appeal,” Calay adds.

Apple and Amazon results: what the analysts expect

Analysts polled by FactSet and LSEG have the following expectations for Apple and Amazon’s results tomorrow:

The FactSet forecasts, if accurate, envisage Amazon’s revenue increasing 9.5% and its earnings rising by 5.6% year-on-year. For Apple, they predict a 3.9% increase in revenue and a 1.4% rise in earnings.

Meta and Microsoft shares swing during final session before earnings

We’re about one hour into the final trading session before Meta and Microsoft announce their results.

Meta’s stock opened 1.1% higher today, but it has fluctuated through the first hour of trading, currently sitting around 0.5% above yesterday’s close.

Microsoft’s share price opened 0.6% higher than yesterday’s close, but has lost much of those gains in the meantime.

Recap: Microsoft and Meta results expectations

Analysts polled by FactSet and LSEG have the following expectations for Meta and Microsoft’s results tonight:

Meta and Microsoft shares will likely make their first moves based on their performance against these headline figures, as well as other relevant factors included in their earnings release, like capex expectations and forward guidance.

We’ve seen before, though, that management comments during the earnings calls can have a big impact on share price movements. The sentiment for both Microsoft and Meta’s stock will depend heavily on whether they can convince investors that they are winning the AI war.

Microsoft results: Azure growth in focus

Microsoft shares are still struggling to make gains during this session, up just 0.14% three hours into trading.

Could strong growth in Azure - Microsoft's cloud platform - give Microsoft stock a boost this evening?

"Cloud performance through Azure was stronger than expected last quarter, and there could be some upside to guidance of 34-35% growth," says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Dan Ives, head of global technology research at Wedbush Securities, also believes that Azure's growth could take the market by surprise.

"We believe the stock still has yet to price in what we view as the next wave of cloud and AI growth," says Ives. "We view MSFT as the clear front-runner on the enterprise hyper scale AI front, despite increasing competition from Amazon's AWS and Google's GCP."

We're going to take a pause in reporting for now. Join us back here at 9pm for live coverage of Microsoft and Meta's earnings releases.

Breaking: Microsoft stock surges on earnings beat

Microsoft's share price has gained over 7% since close of trading.

Earnings per share increased 24% year-on-year to $3.65, and revenue increased 18% to $76.4 billion.

Azure revenue increased 34% year-on-year to $75 billion.

BREAKING: Meta stock up over 9% as earnings soar

Meta's stock, meanwhile, has surged 9.1% in after-hours trading on a bumper earnings beat.

Revenue increased 22% year-on-year to $47.5 billion and earnings per share rose 38% to $7.14 - smashing through the ~$5.90 that analysts had expected.

Concerns over Meta's profits following its AI investments seem misplaced now...

Microsoft's "slam-dunk quarter"

A few more highlights from this earnings beat that has seen Microsoft's stock surge over 7%:

• Intelligent Cloud revenue of $29.88 billion, ahead of an expected $28.92 billion.
• Gross margin of 68.6% beat an expected 68.0%; operating margin of 44.9% beat the expected 43.6%.
• Net income increased 24% year-on-year to $27.2 billion.

"This was a slam-dunk quarter for MSFT with cloud and AI driving significant business transformation," said Dan Ives, global head of technology research at Wedbush Securities. "We believe Microsoft is just hitting its next phase of monetisation on the AI front and more enterprises are accelerating their AI budgets," he added.

Meta's capex will keep growing next year

Meanwhile Meta's stock is still climbing, now up almost 9.5% since those results dropped.

"Meta has knocked it out of the park," says Matt Britzman, senior equity analyst at Hargreaves Lansdown. "AI is clearly delivering real-world benefits for advertisers, and they’re willing to pay more as a result. Average price per ad was up 9% over the quarter, a clear indication that Meta is delivering an improved product for both users and advertisers."

Capital spend is likely to increase $30 billion in the full year 2025, and CFO Susan Li signposted a similar rate of capex growth next year.

That may have taken analysts by surprise, but the market doesn't seem to mind. With the previous investments yielding such strong returns already, big spending seems to be going down well, and Meta shares are climbing.

We're going to end coverage here for this evening, but we'll be back tomorrow with more reaction and analysis for these eye-catching results, as well as a digest of what Meta and Microsoft's management says during their upcoming earnings calls.

Microsoft to enter $4 trillion club?

Good morning, and welcome back to our live coverage of tech earnings season. We’ll be digesting those huge earnings beats from Microsoft and Meta as today goes through.

Meta’s stock has gained 12% in out-of-hours trading since it reported a 22% revenue rise and a massive 38% increase in earnings.

Meanwhile, Microsoft looks set to join Nvidia in the $4 trillion market cap club when regular trading opens today. Microsoft stock has gained 8.7% overnight, following a 24% year-on-year increase in its earnings. Its market cap at close yesterday was $3.81 trillion – so closing today’s session with share price gains of anything over 5% from yesterday’s close will be more than enough to make Microsoft the world’s second $4 trillion company.

End of the AI profitability debate

There have been questions over the last two years as to whether or not the money that the Magnificent Seven hyperscalers are pouring into AI will deliver results.

That debate seems to be over.

"Meta and Microsoft turned over a new chapter in the AI story last night," says Matt Britzman, senior equity analyst at Hargreaves Lansdown. "Both companies crushed it, with debates around whether AI is delivering tangible returns starting to fade into history."

Meta’s stock surges on Superintelligence optimism

There was speculation ahead of Meta’s earnings release that investors would be put off by the big spending that the company is pouring into its Superintelligence Lab. But in the event, the vision of a superintelligent future painted during the earnings call saw Meta’s share price surge.

CEO Mark Zuckerberg led with optimism over the lab and its potential early in the investor call.

“Developing superintelligence, which we define as AI that surpasses human intelligence in every way, we think, is now in sight,” said Zuckerberg at the start of his prepared remarks.

“To build this future, we've established Meta Superintelligence Labs, which includes our foundations, product and FAIR teams as well as a new lab that is focused on developing the next generation of our models.”

Zuckerberg said that AI-infused smart glasses, such as those it has developed with Ray-Ban and a new range it is launching with Oakley, will be the main way that superintelligence is integrated into people’s daily lives.

He explained that one of the biggest technological hurdles that needs to be overcome in building AI that is more intelligent than humans is to build software that can train itself.

“We’ve begun to see glimpses of our AI systems improving themselves,” he said, adding that the progress was “slow for now”.

BREAKING: Wedbush raises Meta share price target

Influential investment bank Wedbush Securities has raised its 12-month price target for Meta from $750 to $920.

Based on where Meta's stock closed regular trading yesterday, that implies 32.3% in share price gains over the next year.

"We believe the recent level of investment is justified, and the infusion of AI capabilities across the company's ad stack and content recommendation engines are driving tangible results for Meta's Family of Apps and Reality Labs," said Scott Devitt, managing director, Equity Research at Wedbush Securities.

Recap: when do Amazon and Apple announce results?

With Microsoft and Meta's stock surging after their earnings beats is easy to forget we've got two more Magnificent Seven companies announcing results tonight.

Here's a recap of those timings:

eToro: Microsoft stock offers "perfect mix" to investors

It’s quite hard to overstate how impressive the double beat from Microsoft and Meta was last night.

Microsoft in particular hit all the right notes for a stock that looks set to break $4 trillion in market cap.

“Microsoft is investing heavily to build AI infrastructure, though it seems to be working,” says Lale Akoner, global market analyst at eToro. “Margins are holding up, and the business is seeing real demand, not just hype.”

Akoner believes that investing in Microsoft is one of the best ways to ride the AI wave long term.

“For retail investors, this is a perfect mix of a tech giant growing fast, spending smart and actually delivering on their AI promise,” she says.

Amazon stock on a high heading into earnings

Amazon’s share price looks set to catch some of the positive fallout from Microsoft’s big earnings beat yesterday. Amazon stock is up 2.6% in pre-market trading five minutes before US markets open.

With Azure revenue growing 39%, investors seem to be positioning themselves for the possibility of AWS following suit.

Scott Devitt, managing director, Equity Research at Wedbush Securities, expects AWS revenue to increase by 16% year-on-year in these results. That figure would put AWS revenue on approximately the $30.5 billion mark.

“AWS commentary was encouraging last quarter, highlighting the strength of AI demand,” Devitt said in a research note. He also highlighted that AWS management had said that AWS growth would have been higher in Q1 were it not for near-term capacity constraints.

BREAKING: Microsoft stock opens session at $4 trillion+ market cap

US markets have opened and Microsoft's share price has opened 8.2% above yesterday's close, more than enough to tip its market cap above $4 trillion during regular trading for the first time in its history.

Can Meta stock stay higher for longer?

Meta’s share price has also sustained its overnight gains, opening today’s session up 11.6% following its stellar results last night.

“Meta reported a blow-out quarter, meaningfully eclipsing both Street and Buyside estimates for 2Q revenue and the 3Q guide,” said Benjamin Black, co-head of Internet Equity Research at Deutsche Bank in a research note.

Black drew attention to Meta alleviating fears that its capex might be getting out of control.

“Perhaps just as importantly, the high ends of both FY25 operating expenses and capex guidance were maintained, while the lower ends were both modestly increased, which is meaningfully better than feared,” he said.

Big spending is perhaps the only cause for concern with Meta’s stock at present.

“Meta is planning to spend a lot more, possibly over $100 billion next year on AI and infrastructure. That’s a huge bet and while it could pay off long term, it adds real risk in our opinion,” says Lale Akoner, global market analyst at eToro.

“Meta stock jumped after earnings, but it’s had sharp ups and downs lately. Investors are still trying to figure out if all this spending will drive future profits, or just higher costs,” she added.

Apple’s share price has fallen 16.5% in the year to date. Apple used to be the world’s most valuable company, but at the moment it is languishing.

Macro conditions haven’t helped. Trump’s tariffs pose a particular threat to the company given how reliant its supply chain is on components manufactured overseas – particularly in China. Apple’s management has already flagged a $900 million hit to its profits as a result of tariffs.

But this is compounded by mounting disappointment on its progress in AI, which has “fallen well short of what investors and consumers have come to expect from one of the world's leading brands”, says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

“Apple Intelligence has so far failed to deliver the game changing experience that was promised, so investors should watch out for any updates on new AI features,” Britzman adds. He also believes that tariff impacts are likely to come under scrutiny during this evening’s earnings call.

Apple and Amazon shares steady heading into results

Apple shares are trading flat today, while Amazon stock is up 1.7%, in their final trading session ahead of results.

On paper, analysts polled by FactSet expect the following figures from each company:

While these numbers could impact Amazon and Apple’s share price moves in after-hours trading, there is also likely to be a strong focus on deeper metrics.

In Amazon’s case, that will be growth of its cloud division, AWS. Microsoft set the bar high on that front last night, with its Azure division posting 39% revenue growth.

Apple, meanwhile, will need to demonstrate to the market that it is not being left behind in the AI race. Again – both Meta and Microsoft have demonstrated that spending big on AI is already delivering profits. Apple will need to convince the market that it is prepared to be bold in this race.

Our coverage is going to pause here for now, but we will be back after these results have been posted to bring you the headlines and all the reaction.

Apple shares rise after encouraging results

Good morning, and welcome back to our live coverage of big tech earnings season.

Apple shares have gained 2% overnight, following the company’s latest earnings release which revealed a return to positive growth territory in China, a key market for Apple.

Revenue of $94.0 billion represented 10% year-on-year growth and a record for Apple’s June quarter. Diluted earnings per share (EPS) were up 12% on last year to $1.57. Analysts had forecast revenue of $89.2 billion and EPS of $1.43.

“This was a major step in the right direction for [Apple CEO Tim] Cook and Cupertino with China the star of the show,” said Dan Ives, global head of technology research at Wedbush Securities.

“Now it's time to address the elephant in the room: the AI strategy which remains absent while the rest of the tech world is laser focused on the AI Revolution,” he added.

Amazon stock falls despite earnings beat

Amazon delivered an earnings beat – $1.68 compared to $1.33 expected – but its share price has fallen by more than 7% since the close of trading yesterday.

Revenue increased by 13% year-on-year to $167.7 billion, well ahead of the $162.2 billion that analysts had forecast.

AWS revenue rose 17.5% to $30.9 billion. In isolation, that’s not a terrible result – but compared to the momentum that Google’s GCP and, in particular, Microsoft’s Azure have demonstrated, investors are clearly concerned that AWS is being caught by its rivals.

“The spotlight was firmly on AWS, and it didn’t quite shine as brightly as expected,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

“While Microsoft and Alphabet have already shown strong momentum in cloud growth, AWS wasn’t the knockout many wanted to see, highlighting just how tightly investor sentiment is tied to the AI narrative right now.”

AI pessimism dampens reaction to Apple’s results

The 2% overnight gain for Apple’s shares is a fairly modest response to what is on paper one of the strongest sets of results in recent years.

iPhone sales grew 13% year-on-year, as did Apple’s Services division.

Investors, though, are clearly still underwhelmed by Apple’s progress on AI.

“We believe our platforms offer the best way for users to experience the full potential of generative AI,” said CEO Tim Cook during the earnings call that followed Apple’s results.

But the market isn’t convinced.

“Apple should be a leading name in AI hardware, but that’s simply not the case,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Apple Intelligence was a flop, so a lot of hope now lies in an AI-powered Siri – but that might not come until next year.

“Brand loyalty gives Apple time to get the AI transition right, but it needs to start delivering,” adds Britzman.

Thank you for following

Thanks for following our coverage of Meta, Microsoft, Amazon and Apple's results.

We're going to wrap up our live reporting here. But we will keep breaking down the latest round of results and their implications for the market over the coming days, so keep checking MoneyWeek for the latest news on tech stocks.

We'll also bring you live coverage of Nvidia's results at the end of August. With cloud revenue booming and AI capex booming in Magnificent Seven results season so far, will it be another bumper set of results for the semiconductor giant?

Summary

• Alphabet announced earnings per share (EPS) of $2.31 and revenue of $96.4 billion, beating analyst estimates
• Tesla’s results showed EPS of $0.40 and revenue of $22.50 billion, down year-over-year, but in line with analyst estimates
• Tesla shares fell over 4.6% during the earnings call
• Five other Magnificent Seven companies announce earnings next week. Nvidia announces at the end of August

The MoneyWeek team is bringing you rolling previews and analysis, along with live coverage and reaction. Keep following for the latest.

| Magnificent Seven latest | Invest in Tesla? | S&P 500 | AI ETFs |

Good morning, and welcome to our live coverage of another big tech earnings season.

Two of the industry’s heavy hitters – Netflix (NASDAQ:NFLX) and Taiwan Semiconductor Manufacturing Company (NYSE:TSM) – got things underway last week, but big tech earnings season truly kicks into gear this week, as the first two of the Magnificent Seven companies announce their results on Wednesday.

Alphabet’s earnings release will be an intriguing glimpse into how the company is navigating the choppy waters that artificial intelligence poses. Is its core Search business holding up in the face of increased AI competition? If not, can growth of its Google Cloud service make up for any shortfall?

Then there is Tesla. Once again, quarterly delivery numbers have disappointed, calling Musk’s much-publicised political activity into question. But Tesla is now a robotics company – didn’t you know? – so updates on this month’s robotaxi launch will be the focus of attention at Tesla’s earnings call.

We will bring you rolling updates, preview and analysis, throughout this week and next.

When are Alphabet’s and Tesla’s earnings releases?

Both Alphabet and Tesla announce earnings after US markets close on Wednesday 23 July.

Alphabet’s earnings call is scheduled for 1.30pm Pacific Time (9.30pm in the UK), half an hour after US markets close. Its earnings will likely be published online during that window.

Tesla’s earnings call is scheduled to start at 4.30pm central time – 10.30pm in the UK, so one hour later than Alphabet’s.

TSMC results paint upbeat picture for big tech earnings

Taiwan Semiconductor Manufacturing Company – often referred to as TSMC for short – is rarely included in any of the big tech groupings, and isn’t anything like as much of a household name, but that is perhaps unfair.

In a nutshell, it is the world’s most advanced manufacturer of computer chips. Nvidia, which is the best-known semiconductor company in the world, doesn’t actually build any of its chips. TSMC does. It also builds chips for Apple, Arm, Qualcomm, AMD and Broadcom.

TSMC announced a 61% increase in profits last week, with revenue rising 39%. Yesterday, the company joined several of its high-profile customers in the $1 trillion market cap club.

Given that it builds the hardware that the rest of the tech industry depends on, TSMC’s success is a good bellwether for the health of the sector.

Netflix shares fall despite earnings beat

Streaming giant Netflix also posted its results last week. Shares fell in after-hours trading following the announcement, despite an earnings beat, exemplifying the weight of expectation that big tech companies are under at present.

Netflix was once numbered among the world’s most prominent big tech stocks during the ‘FAANG’ (Facebook, Amazon, Apple, Netflix and Google) era. Now, with a market cap around $520 billion, it is no longer in the upper echelons of big tech stocks, analysts, if not the market as a whole, were impressed with its 16% year-on-year revenue growth, and 47% increase in earnings.

“Netflix continues to produce phenomenal results with ever more growth in its sights,” said Alicia Reese, SVP Media & Entertainment equity research at Wedbush Securities. “Even as investor expectations were high heading into the print, and shares reflected some disappointment in the size of the beat and raise, the quality of the beat and raise keeps us positive as we assess the ongoing expansion of Netflix’s free cash flow.”

See our explainer on the results and subsequent Netflix shares reaction for more detail.

S&P 500 earnings strong so far

TSMC and Netflix are two of the highest-profile tech companies to have beaten earnings estimates so far, but it’s a trend that is playing out across the S&P 500.

Around 60 of the biggest 500 US companies have declared Q2 results so far. Of those, more than 80% have beaten expectations.

“That’s not unusual,” says Tom Stevenson, investment director at Fidelity International. “Companies tend to massage forecasts lower in the run up to results season.

“But it does suggest that earnings growth will continue at around the long-run average of 7%,” he adds.

Of course, with their high valuations, most of the Magnificent Seven stocks are expected to grow their earnings above this rate. Will they deliver?

Alphabet earnings: the watch-outs

Let’s take a closer look at the big tech earnings releases coming up this week, starting with Google’s parent company Alphabet.

Market sentiment towards Alphabet has dimmed in recent months. It is the cheapest of all the Magnificent Seven companies relative to past and projected earnings, trading at 21.22 times trailing earnings and 20.46 times projected earnings – below the S&P 500’s average on both fronts.

The fact that those two figures are so close to each other highlights part of the problem: analysts do not see Alphabet’s earnings growing significantly in the near future.

Many fear that generative AI could cut into demand for Google’s core Search business.

“New competition from language models like ChatGPT [is] a genuine threat,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Alphabet has a quality lineup of businesses, but its long-standing crown as the entry point to the internet is under pressure, and that’s put the valuation under strain.”

There is also the possibility that regulators could force a breakup of Google’s business, with two antitrust cases having found that the company operates an illegal monopoly over internet search over the last year.

“Calls for a forced Chrome divestment could challenge Alphabet’s search dominance, and that will keep some investors cautious until there’s more clarity,” said Josh Gilbert, market analyst at eToro.

Google has said it will appeal the decisions, but with Search lying at the heart of Google, any updates will be closely monitored on Alphabet’s earnings call on Wednesday.

Alphabet earnings: the tailwinds

While generative AI poses a threat to Alphabet’s business, it also offers opportunities, and investors will watch out for these keenly at the earnings call tomorrow.

For one thing, AI demand is driving growth of Google Cloud, with analysts projecting top-line cloud revenue growth of around 26-27%.

“Alphabet is continuing to invest heavily in Gemini, its flagship AI assistant, as well as AI-powered ad products and enterprise tools,” says Josh Gilbert, market analyst at eToro. “With growing investor interest in monetisable AI applications, updates on Gemini’s integration into Search, Workspace and Cloud could be a key focus this quarter.”

Capital expenditure is likely to rise, but the market won’t necessarily regard that as a negative given the arms race that big tech companies are engaged in over AI.

“In this environment, it’s spend or get left behind,” says Gilbert.

Tesla earnings: under-delivery becoming a habit

Tesla’s earnings will be released under a cloud: delivery numbers fell year-on-year for the second consecutive quarter. The company announced a total of 384,122 deliveries for the quarter on 2 July.

Shares in Tesla actually rose by 4% following the announcement, but fell 8.4% on 7 July. Tesla shares have fallen nearly 20% this year, as the relationship between CEO Elon Musk and president Donald Trump has soured.

“Elon’s position as a Tony Stark-like personality at the head of the company was a boon for a long time, but it’s hard to argue that his prominence isn’t having some detrimental effect on the brand,” says Josh Gilbert, market analyst at eToro. Read more on Musk’s changing relationship with Tesla here: Who’s driving Tesla?

Cybertruck sales have also continued to decline, having hit their lowest level in a year during the last quarter.

Fairly poor financial results can be almost baked-in for Tesla, barring any major cost-cutting achievements. As is often the case with the company, the short-term share price movements might hinge more on what Musk says that what the numbers show.

Tesla earnings: the robo-revolution

Tesla believers, though, don’t tend to have their faith shaken easily. Few are more bullish than Dan Ives, global head of technology research at Wedbush Securities.

Ives points to an uptick in Chinese sales during June as one reason for optimism ahead of Tesla’s earnings.

“Despite seeing more low-cost models enter the market from Chinese OEMs like BYD, Nio, Xpeng, and others, the company’s recent updates to the Model Y spurred increased demand,” says Ives.

With the long-awaited robotaxi launch having taken place in Austin earlier this month, there will be plenty for Musk to shout about if he wants to. Investors will look for updates on all things robotics when gauging Tesla’s mid-term prospects.

“There are a number of other key endeavors at Tesla including Optimus and the future of robotics, with Tesla one of the clear future leaders in AI in our view,” says Ives.

Thanks for following our reporting ahead of Tesla and Alphabet's earnings. We're leaving things here for today, but join us here again tomorrow morning for a full day of preview and analysis ahead of live coverage of the earnings releases in the evening.

Good morning, and welcome back to our live coverage of big tech earnings season.

This evening sees both Google parent Alphabet and Elon Musk's Tesla announce their second quarter (Q2) results.

Both companies are coming into this earnings season facing challenges as well as headwinds from the rise of artificial intelligence (AI). Follow here live for rolling previews and live updates from both earnings calls.

When do Alphabet and Tesla announce earnings?

To recap, both Tesla and Alphabet announce their Q2 earnings today, after US markets close. That means any time from 9pm in the UK.

Tesla and Alphabet will host an earnings call where management will field calls from analysts. These are scheduled to take place back to back. The earnings release for each company could land any time between the close of markets and the start of the earnings call, but they tend to land fairly soon after markets close.

The key timings are summarised in the table below:

Alphabet and Tesla earnings: what to expect

Analysts are forecasting the below revenue and earnings per share figures at Alphabet and Tesla’s releases this evening, according to consensus estimates from analysts polled by FactSet and LSEG:

Based on FactSet estimates, analysts expect Tesla’s revenue to fall 12.6% year-on-year, and for its earnings to fall by 23.1%.

The forecasts imply a 10.9% increase in revenue and a 15.3% increase in earnings for Google’s parent company Alphabet.

Alphabet earnings: beyond the numbers

As ever with big tech earnings, it is less likely to be the headline numbers that dictate which way Alphabet's shares trade immediately after it announces results today.

Instead, the data and comments from management surrounding the longer-term challenges and opportunities is likely to be the main driver.

In Alphabet's case, this all boils down to whether or not the potential gains from AI outweigh the threats it causes to the Google parent company's business.

"The rise of ChatGPT and other AI platforms has created unprecedented challenges for Google's search business," says Fabien Yip, market analyst at IG. "These new competitors offer conversational interfaces that provide intellectual answers to complex questions, potentially reducing users' reliance on traditional search engines and the advertising revenue they generate."

Google has developed competitors to ChatGPT, particularly its latest model Gemini 2.5 Pro, and investors will look for evidence of growth and adoption of Gemini during tonight's earnings call.

There is also the opportunity for Google Cloud to keep taking market share from competitors, like Amazon Web Services and Microsoft Azure.

"Innovation in AI enterprise solutions will be crucial for Google Cloud's continued success," says Yip. "The company's ability to integrate cloud offerings with other Google products like Workspace provides a competitive advantage that rivals find difficult to replicate."

Could Tesla invest in xAI?

One topic that could come up on Tesla’s earnings call this evening is the possibility of the company investing money into Elon Musk’s artificial intelligence start-up, xAI, which makes the Grok chatbot.

“Tesla is about to embark on an aggressive AI-focused strategy that we believe will include owning a significant piece of xAI,” says Dan Ives, global head of technology research at Wedbush Securities. “While near-term and this quarter the numbers are nothing to write home about, we believe investors are instead focused on the AI future at Tesla.”

Tesla investing in xAI would be subject to a shareholder vote later this year. Historically, Tesla investors have tended to follow Musk’s lead when it comes to corporate votes, but Josh Gilbert, market analyst at eToro, feels that convincing investors to put Tesla money into another Musk company could be a hard sell.

“Even if there is a theoretical future benefit for Tesla, it’s going to be a very hard case to make,” he says.

Winning the AI race: Trump to speak at AI summit as Tesla announces earnings

Today’s tech earnings announcements are conveniently timed, coinciding as they do with a major event in American AI.

President Donald Trump is due to speak at the ‘Winning the AI Race’ summit hosted by the All-In podcast and the Hill and Valley Forum in Washington, DC today.

Along with senior leaders from tech companies like Palantir and VC firms such as Y Combinator, Trump is expected to outline a roadmap to making the US the world’s leading AI economy.

Dan Ives, global head of technology research at Wedbush Securities, anticipates three main strands:

• The build-out of AI infrastructure;
• Innovation aimed at blocking states’ ability to hinder AI development with regulation;
• Ensuring that global US allies adopt its models, rather than those of “foreign adversaries”.

“The Trump keynote will likely aim at outlining a national AI strategy while targeting aggressive plans to accelerate chip exports reflecting the new administration’s elevated focus on winning the AI race,” says Ives.

Trump’s address is scheduled to take place at 5pm Eastern time, and as such could overlap with both Alphabet and Tesla’s earnings calls.

TSLA and GOOGL shares: one hour until US markets open

There is just under an hour to go until US markets open for the final session before Tesla and Alphabet announce their results.

Yesterday, Tesla stock gained 1.1%, but pre-market moves suggest Tesla shares could open today slightly below this level.

Alphabet shares likewise saw gains yesterday, of around 0.65%, but look set to open slightly down today.

Tesla share price opens 0.4% down ahead of earnings

US markets are now open, and shares in Tesla have opened the final session before the Q2 earnings release 0.4% below yesterday’s close.

Tesla shares have fallen around 18.3% so far this year

Alphabet’s shares opened today’s session slightly above yesterday’s close, but have since slipped below it.

Investors can expect big changes in both Alphabet and Tesla’s share price in after-hours trading following their earnings announcements today.

Magnificent Seven earnings calendar

Alphabet and Tesla are the first two Magnificent Seven companies to announce their Q2 earnings. Here’s the full schedule with the rest of the season’s releases:

There is a big gap between the first six companies and Nvidia, as is usual. Some semiconductor companies, such as Broadcom, won’t release their results until September.

Google revenue: what to watch in Alphabet's earnings release

Google’s heart and soul is its Search business, but its Cloud division is the fastest-growing segment by some distance.

“Cloud growth is the other key driver for Alphabet, with Google Cloud looking much more competitive for AI workloads than it was in previous cloud wars,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Analysts are forecasting somewhere between 26-27% revenue growth for Google Cloud, implying a figure of $13.04-13.14 billion.

Alphabet’s share price movements following the earnings call could largely depend on whether the figure comes in above or below this level.

Look out also for Google Services revenue. This division includes the core search and advertising revenue that Google’s empire is built upon.

Analysts expect growth here to slow to 8.5%, implying a figure of $80.21 billion. Beating that would suggest that Google Search is more resilient than thought to the generative AI threat – for now at least. However, falling short could set alarm bells ringing.

We're going to pause coverage for a few hours, but we'll be back around 9pm, when US markets close. Join us then as we report Tesla and Alphabet's earnings releases live.

Tesla shares look set to close up ahead of earnings

Good evening, and welcome back to our live coverage of Alphabet and Tesla's results.

Tesla shares opened this session down, but are around 0.3% up for the day as we head into the final minutes of regular trading.

Shares in Alphabet, though, have fallen through this session. Will Q2 results, and the subsequent earnings calls, change the picture for either stock?

US markets close; Alphabet and Tesla results now due

US markets have now closed. Alphabet shares finish this session 0.58% down, while Tesla's stock gained 0.14%.

Attention now shifts to the imminent release of each company's Q2 earnings report. As a reminder, here's what analysts polled by FactSet and LSEG are expecting:

BREAKING: Alphabet earnings rise 22% year-on-year

Alphabet's headline figures are in:

• Revenue of $96.4 billion, 14% up year-on-year
• Earnings per share of $2.31, up 22%

Alphabet beats on revenue and earnings

Both earnings and revenue came in above analysts' expectations. Google Search and Google Cloud revenue have both beaten expectations too.

Services revenue increased 12% to $82.5 billion, while Cloud revenue grew 32% to $13.6 billion. Analysts had been forecasting these segments to grow by 8.5% and 27% respectively.

Despite this, Alphabet shares have fallen 2.3% in after-hours trading. A reflection, perhaps, of how high market expectations are on the big tech giants.

BREAKING: Tesla earnings fall by 23%

Tesla has now released its results. The headline figures:

• Total revenues down 12% year-on-year to $22.50 billion;
• Earnings per share down 23% to $0.40.

Numbers like these were expected; earnings per share is exactly as FactSet analysts had forecast, while revenue is a touch higher.

Tesla shares are, in fact, gaining ground in after-hours trading following the earnings release.

Alphabet bumps capex to $85 billion

Alphabet's results make great reading on the face of it. Beats across the board, and the core Google business lines (especially Search and Cloud) have outperformed expectations.

The share price is tanking all the same.

One reason for this could be a big spending announcement.

"We are increasing our investment in capital expenditures in 2025 to approximately $85 billion and are excited by the opportunity ahead," said Alphabet CEO Sundar Pichai in the earnings release.

Has this big spending increase caught the market off-guard? AI is known to need big cap-ex from the major players, but some investors may be baulking at the level of this spend.

Tesla: affordable car is now in production

Tesla stock made gains immediately after its results were released - though these have since reversed.

Poor financial results had already been factored in ahead of today's results, given the deliveries were announced earlier in the month.

But there are positives in the earnings release. One of these is an announcement that the long-awaited affordable car began production in June, and that this will scale up in the second half of 2025.

The announcement also states that Cybercab will enter volume production in 2026. Anything relating to the self-driving car business is going to attract investors' attention. Expect Elon Musk to dive into detail on this during this evening's earnings call.

Alphabet earnings call starts

Alphabet's earnings call is now getting underway. Management will flesh out the raw numbers that have already been released.

Shares are down about 1.25% in after-hours trading at the start of the call.

Alphabet earnings highlights: Alphabet CEO says AI is benefitting Google Search

Alphabet CEO Sundar Pichai is delivering his open remarks, and striking an emphatic tone on the positive impacts of AI on Google’s business.

AI Overviews in Google Search now has over 2 billion monthly users, across more than 200 countries, according to Pichai.

The Gemini app has over 450 million monthly active users. Daily requests were 50% higher in June alone than in the first quarter of the year.

“AI features cause users to search more, as they learn that search can meet more of their needs,” says Pichai. That seems to be a direct response to market fears that generative AI could eat into demand for Google Search.

The market is responding positively to these comments. Alphabet stock has rebounded to above where it closed today’s session, reversing the share price drop that accompanied the results’ initial release.

Alphabet’s capital expenditure in focus

According to Alphabet’s CFO Anat Ashkenazi, the extra $10 billion that Alphabet is spending this year largely reflects “additional investment in servers, the timing of delivery of servers and an acceleration in the pace of data centre production, primarily to meet cloud customer demand”.

Both she and Pichai have spoken of a tight supply environment for compute power, as the world’s technology companies vie for access to the world’s data centre resources.

Part of Alphabet’s response to that tight market is to increase the supply, by building out its own data centre infrastructure. But Pichai warns there will be a lag before that new capacity comes online; demand for compute power is going to outstrip supply for the foreseeable future.

Alphabet's share price has now gained more than 3% in after-hours trading, as investors digest management's framing of the results.

Can Google Search keep making money in the AI era?

A question has come in on the monetisation of Google Search, given the falling number of ad impressions available per click-through in the era of AI Overviews.

Google's chief business offer Philipp Schindler replies: "AI Overviews... continue to drive higher satisfaction [and] higher search uses.

"We see monetisation at approximately the same rate, which gives us a really strong base on which we can then innovate and drive more innovative, next-generation ad formats."

Alphabet's earnings call sees shares gain 2.7%

Alphabet's earnings call has now finished. Shares are up 2.7% in after-hours trading at the end of it.

Now our attention turns to Tesla, whose earnings call will start shortly. At present, Tesla shares are down around 0.4% in after-hours trading.

Tesla: robotaxis could serve half US population by the end of the year

Tesla's earnings call starts with some big statements on the rollout of its (geofenced) robotaxi service.

Robotaxi is set to expand to "well in excess of what competitors are doing" in the next two weeks, says Tesla CEO Elon Musk.

The company is also seeking regulatory approval to launch in the San Francisco Bay Area, Arizona and Florida. Musk says that by the end of the year, Tesla will "technically" be able to offer self-driving rides to half the US population.

"That's our goal, subject to regulatory approvals," said Musk.

Musk aims for 1 million Optimus robots annually within five years

Optimus, Tesla's humanoid robot, will have prototypes this year, followed by scaled production next year, says Musk.

He says that the objective will be to produce one million units per year as quickly as possible - hopefully, within five years, he says.

Market will need more convincing on Google’s AI staying power

The conundrum that surrounded Alphabet, and whether AI is a headwind or a tailwind for Google, still remains even after a strong set of results.

“Alphabet is being forced to adapt or risk becoming a dinosaur in the new AI age,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

The numbers on the key areas – Search and Cloud revenue – were impressive. But the question of monetisation remains.

“The Alphabet AI investment case is something of an enigma,” says Britzman. While the market seems to have decided that Alphabet is destined to be a loser in the AI race, Britzman feels that view is “both short-sighted and overly pessimistic.

“That said,” he adds, “until there’s more confidence that AI integration won’t cannibalise core search revenue, and some clarity around ongoing legal battles, there’s enough uncertainty to cap near-term upside.”

Customers love robotaxi, says Tesla

The opening remarks in Tesla's earnings call are now done. They were unusually uneventful, the robotaxi and Optimus plans notwithstanding.

The first analyst question asks for more detail on the robotaxi rollout.

"Robo taxi has been doing great so far in Austin," replies Tesla's CFO Vaibhav Taneja. "Customers really love the experience. Super smooth, very safe, and just a great experience overall."

He adds that expansion in Austin has already started, and that testing in a number of other cities has already started.

Tesla CFO: not appropriate to discuss xAI investment in earnings call

A question is asked about the benefits of Tesla invested into xAI.

CFO Janeja replies that this isn't the forum to discuss that issue, and that "if there is something which we need to discuss, we'll discuss it separately".

Musk then adds, "Obviously, we're a publicly-traded company. Shareholders are welcome to put forward any shareholder proposals that they'd like. I personally encourage that."

Tesla stock falls 2.8% in after-hours trading

Tesla shares slumped at around the time that Elon Musk finished his prepared remarks. They are now down around 2.8% in after-hours trading.

Most of the comments have been a little underwhelming, and non-specific. A lot of reasons given for delays in delivery - but many of these same reasons have been given at previous earnings calls.

Is the market starting to lose patience with Tesla?

How will the end of EV tax credits impact Tesla?

The end of tax credits could lead to "a few rough quarters", says Musk in response to a question on the subject. President Donald Trump has said that he will remove the electric vehicle (EV) tax credits that were introduced during the Biden era later this year.

Musk says that while tax incentives for EVs are vanishing in the US, they are still in place in much of the rest of the world.

"On the other hand, autonomy is most advanced and available from a regulatory standpoint in the US. So does that mean we could have a few rough quarters? Yeah, we probably could."

While the second half of this year and the first half of next could be tricky, Musk says that "once you get to autonomy at scale in the second half of next year... I'd be surprised if Tesla's economics weren't very compelling".

That's the end of Tesla's earnings call. Shares are down over 4.6% in after-hours trading, with investors having responded negatively to a cautious set of responses from Musk and his team.

Thank you for following our live coverage. That's everything for this evening, but we will be back tomorrow morning with rolling analysis and reaction to Google and Tesla's earnings.

Tesla’s long game

Good morning, and welcome back to live coverage. We’ll spend today breaking down the implications of last night’s earnings results from Alphabet and Tesla.

There are two contrasting stories there. Alphabet’s share price gained 2.3% in after-hours trading as management was able to paint an upbeat picture of Google’s place in the AI ecosystem, in spite of the challenges to its core business that the technology poses.

But Tesla’s share price fell 6.1% in after-hours trading, as CEO Elon Musk warned that the company could be set for a tough period until the second half of 2026.

“The typical playbook for the past few quarters has been declining fundamentals but enough AI hype to keep investors sleeping at night,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Musk’s cautious tone went against this typical pattern, but he was as ever bullish about the longer-term plan for Tesla, saying it is easier to predict where the company will be in five years’ time than in one or two.

“Tesla is in a very small cohort of companies with enough growth potential that investors are, for now at least, willing to look past weakening core financials,” says Britzman. “Last night's comments confirmed many fears around tariffs, rising costs, tougher margins, and struggling cash flows.

“But with that now firmly built in as the base case, the AI story can take back the wheel.

Robotaxi versus Waymo

One of the big questions that surrounds Alphabet and Tesla – and which both management teams discussed on last night’s earnings calls – is the future of the self-driving car market. Google’s Waymo and Tesla’s robotaxi are viewed as the two front-runners.

Waymo has now covered 100 miles on public roads, it was revealed yesterday. But Elon Musk went out of his way to talk down Waymo’s prospects, saying “Google is good at AI, yes, but they’re not good at real-world AI”.

ARK Invest – known for its bullish stance on Tesla – explains why they feel Tesla is the frontrunner in this race.

“Waymo in San Francisco, while more expensive than Uber and Lyft, are already starting to take share,” says Sam Korus, director of research for autonomous technology & robotics at ARK Invest. “And there are a lot of reasons why Tesla should be able to offer rides for a lower price than Waymo.

“They're using vision only, so their vehicles are less expensive. They have an adaptable fleet, so they can meet peak trough demand, without having underutilised vehicles. And they've got manufacturing scale so don't have to negotiate with other auto manufacturers.”

He adds that Tesla produces around 5,000 cars per day, which is around double the size of Waymo’s entire fleet. All of these can hypothetically become self-driving robotaxis.

“At the end of the day, people are going to look at an app and say, I can get from point A to point B for less money,” adds Korus.

Google Search looks safe for now

A major highlight for Alphabet last night was the resilience that its core Google Search business showed.

“Management commentary should alleviate investor caution around the perceived risks of generative AI on the Search business,” said Scott Devitt, managing director, Equity Research at Wedbush Securities. “These concerns are overdone, in our view, with Alphabet validating its ability to navigate this period of transition by exhibiting healthy query volume growth across both new and traditional surfaces.”

Top-line revenue growth for the Search arm beat analysts’ expectations, coming in at 11.7%. Paid click growth accelerated from 2% in Q1 to 4% in Q2.

While Alphabet still trades at the lowest earnings multiple of all Magnificent Seven companies, Devitt feels there is room for this improve over the coming quarters as investors become more comfortable with “the current macro environment, regulatory risk and the impact of generative AI on the business”.

Tesla and Alphabet earnings recap

Here’s a reminder of the headline results that Alphabet announced last night:

Tesla’s results looked like this:

Expectations are based on the consensus estimates of analysts polled by FactSet.

Tesla stock continues to fall

Any hope that Tesla stock would bounce back quickly from its after-hours decline has been dashed today.

Tesla's share price opened today's session 6.8% below yesterday's close, and has since fallen further, currently down around 7.6%.

The data centre supply gap

There was much talk during Alphabet’s earnings call yesterday on the tightness of compute supply: that is, how much resource is available in AI-dedicated data centres compared to the demand for it.

That tight supply is what eventually ameliorated the market’s response to Alphabet’s eye-watering $85 billion capex figure for 2025. There is huge demand for resources, and with Google Cloud revenue growth exceeding expectations, it makes sense for Alphabet to invest in capturing this market.

“AI adoption is growing at a speed far greater than what anyone is prepared for,” says Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics. Morningstar’s demand model forecasts US data centre capacity to triple between 2024 and 2030.

So while Google’s investment seems extreme at first glance, this is a market with significant growth potential. Google Cloud’s backlog increased 38% year-on-year, “implying continued momentum in the coming periods”, says Scott Devitt, managing director, Equity Research at Wedbush Securities.

Thank you for following our coverage of Alphabet and Tesla's earnings releases. We're going to end things here for now, but we'll be back next week for coverage of the next four Magnificent Seven stocks to announce earnings: Amazon, Apple, Meta and Microsoft.

Summary

• The rate of UK inflation jumped by more than expected in June, hitting 3.6%. It follows a reading of 3.4% in May.
• The Bank of England had forecast 3.4% this month. Other economists including those at Pantheon Macroeconomics thought inflation would creep up to 3.5%, but a reading of 3.6% comes as a surprise.
• Inflation is expected to rise further as the year progresses.
• “Looking ahead, upward pressures are likely to push annual inflation higher through the year. We see headline inflation peaking at 3.8%, before slowing through 2026,” said Sanjay Raja, Deutsche Bank’s chief UK economist.
• Although the Bank of England will pay close attention to June’s inflation report ahead of its next interest rate decision, a cut is widely expected on 7 August after signs of weakening in the jobs market.
• The economy also shrank for the second month in a row in May, according to GDP figures published on Friday.

| What is inflation? | What is the Consumer Prices Index (CPI)? | Inflation outlook | When will interest rates fall further? | CPI release dates | Bank of England meeting dates |

Hello and welcome. Will inflation rise tomorrow?

Good afternoon, and welcome to MoneyWeek’s live report on inflation. June’s CPI report will be published at 7 am tomorrow. Some economists expect inflation to hold steady at 3.4%, in line with the Bank of England’s forecast, while others expect it to creep up to 3.5%.

Stick with us as we bring you the latest preview analysis and live reporting. We will be looking at what’s driving UK prices, what it means for the Bank of England’s upcoming interest rate decisions, and how it impacts your personal finances.

Rising food prices could push inflation higher

Research provider Pantheon Macroeconomics expects CPI to creep up to 3.5% in June, partly driven by food prices. This would represent a 0.1 percentage point increase compared to May, when inflation was 3.4%. Extreme weather has impacted harvest yields, and higher employment costs are also pushing prices up.

Although Deutsche Bank expects the headline rate of inflation to hold steady at 3.4% in June, it also acknowledges the “continued pressure building in food prices”, describing retail and wholesale prices as “uncomfortably strong”.

Kantar grocery price inflation hit 4.7% in June, the highest annual rate since February 2024.

When was index day?

The exact CPI reading this month could depend on when the ONS collected its index data. Pantheon Macroeconomics has assumed it took place on 17 June, while Deutsche Bank has opted for 10 June. The timing of index day will impact the accuracy of their forecasts.

If the ONS went for earlier in the month, the headline CPI figure could be slightly lower than the 3.5% Pantheon has forecast. This is because airfares, hotel prices and clothes prices all appear to have risen later on in the month.

The warmer weather is partly to thank. It seems to have pushed hotel and clothes prices up in late June, as demand for travel and summer wardrobe items increased.

Will the Bank of England cut interest rates in August?

Even if inflation creeps up slightly to 3.5% in tomorrow’s report, an interest rate cut seems to be on the cards when the Bank of England next meets on 7 August.

The latest ONS report showed a marked slowdown in the jobs market which, if sustained, could strengthen the case for faster rate cuts. The unemployment rate increased to 4.6% annually between February and April, the highest level in almost four years. The number of job vacancies dropped by 63,000 over the quarter.

ONS survey data suggests some firms are not recruiting new workers or replacing those who have left as business confidence weakens. Wage growth also slowed to 5.2% annually over the same period, down from 5.6% in the previous report.

This could be linked to the fact that employers’ National Insurance contributions and the National Living Wage went up in April, making it more expensive for businesses to employ people. There are also fears that Donald Trump’s tariffs could dampen growth and push costs up for businesses and consumers.

Inflation vs growth concerns: a tough tightrope for the BoE

It feels strange to be discussing interest rate cuts when inflation is high and rising. The Bank of England expects CPI to hit 3.7% by September. But the MPC has a tough tightrope to walk. As well as keeping inflation under control, it needs to support economic growth.

Growth fears are now ramping up after signs of weakening in the labour market – discussed in our previous post. The economy also shrank for the second month in a row in May, according to GDP figures published on Friday.

“The upcoming base rate decision will be more than a number and it will provide critical insight into how the Bank of England views the balance between taming inflation and supporting a slowing economy,” said Adam French, consumer expert at financial information company Moneyfacts.

“Beyond the immediate market reaction, it will shape mortgage rates, guide fiscal confidence and underpin the central bank’s institutional credibility.”

What does higher inflation mean for your savings?

Savers are now getting squeezed on both sides. Inflation is high and rising, but interest rates are coming down.

Remember, even if inflation doesn’t creep up tomorrow, the Bank of England expects it to hit 3.7% by September. At the same time, most economists are forecasting two more interest rate cuts before the end of the year.

If the interest rate on your savings account is lower than the rate of inflation, you are losing money in real terms. Shop around for a better rate. If you are happy to lock up your cash for a year or so, it could make sense to fix your savings to lock in higher rates for longer.

Best rates on the market

The good news is that lots of accounts on the market still offer an inflation-beating rate. Using a comparison tool like Moneyfacts can help you find the best deals:

• Best easy-access savings rate: 5% (Cahoot and Chase)
• Best easy-access cash ISA rate: 4.98% (Trading 212)
• Best one-year fixed savings rate: 4.52% (Tandem Bank)
• Best one-year fixed cash ISA rate: 4.16% (Virgin Money)

^{Source: Moneyfacts as of 15 July 2025. Rates based on accounts with no minimum deposit requirements.}

Make sure to read the small print to understand whether the interest rate only applies up to a certain balance. Some accounts also include temporary bonus rates. Always remember that the interest on a variable-rate account can drop at any time. It is also important to pay close attention to any withdrawal restrictions.

Are consumers feeling stretched by rising prices?

UK households have been holding up fairly well, and many have a comfortable savings buffer. The UK household saving ratio was 10.9% in the first quarter of 2025, according to the latest ONS figures. Although inflation is above target, prices are rising far more slowly than at the peak of the cost-of-living crisis. For context, inflation hit 11.1% in October 2022.

That said, there have been a string of nasty bill hikes in recent months. ‘Awful April’ saw energy costs rise by 6.4% annually, water bills by an average 26%, and council tax bills by around 5% in most local authorities.

Energy costs have since fallen back with the new Ofgem price cap kicking in from July, but gas and electricity bills are still significantly higher than before the energy crisis.

Going forward, new pressures could emerge too. Real wages have generally been rising since mid-2022, but this could be set to change now that the economy is slowing. Businesses could look for ways to cut their wage bill to help offset the effect of higher National Insurance contributions. Some have warned that this will mean reducing employees’ hours or offering smaller annual pay rises.

Commenting after last month’s labour market report, which showed a slowdown in the rate of wage growth, Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “In this environment it’s key to take stock as soon as possible. You can’t rely on wage rises in the coming months, so you need to build a robust budget right now rather than hanging on for payday.

“It’s also worth considering what would happen if you were unable to work for a period. It’s why advisers will recommend having an emergency savings safety net big enough to cover 3-6 months’ worth of essential spending.”

See our article: “How much should I have in emergency savings?”

Thank you for following our live analysis this afternoon. We will be back tomorrow morning before the inflation figures are published at 7am. Join us then.

Welcome back

Good morning and welcome back to our inflation live coverage. June’s report will be published at 7am.

To recap, the consumer prices index rose by 3.4% on an annual basis in last month’s report, covering May. The rate of price increases is expected to either hold steady at this level or creep up to 3.5% in June.

Stick with us for live reporting and analysis.

The path of inflation

Inflation has been rising over the past eight months but remains well below the peak seen in October 2022, at the height of the cost-of-living crisis.

Consumer prices index – annual inflation rate (%)

BREAKING: Larger-than-expected inflation jump

Inflation hit 3.6% in June, up from 3.4% in May – higher than the 3.4% predicted by the Bank of England and the 3.5% predicted by some economists.

Transport costs push inflation higher

The largest upward contribution to the increase in the CPI rate came from the transport division, particularly motor fuels, the ONS said.

Although the average price of petrol fell between May and June 2025, it fell by less than a year ago.

There were also upward effects from air fares, rail fares, and maintenance and repair of personal transport equipment.

Transport costs rose by 1.7% in the 12 months to June, up from 0.7% in the 12 months to May.

Highest level of food inflation in 16 months

The rate of food inflation increased for the third month in a row, coming in at 4.5% annually. This is the highest level recorded since February 2024, but remains well below the peak of 19.2% recorded in March 2023.

Some economists, including those at Pantheon Macroeconomics, had been expecting an even higher reading of 4.7%. Poor harvests and higher employment costs have put upward pressure on food prices in recent months.

Rachel Reeves: "working people still struggling with cost of living"

Responding to this morning's inflation report, chancellor Rachel Reeves said: "I know working people are still struggling with the cost of living. That is why we have already taken action by increasing the national minimum wage for three million workers, rolling out free breakfast clubs in every primary school and extending the £3 bus fare cap. But there is more to do and I’m determined we deliver on our Plan for Change to put more money into people’s pockets."

Households should exercise caution

Rising inflation is never good news for consumer budgets – and some might be starting to tire of the ongoing gloom and doom.

Some households are still recovering from April’s bill hikes, not to mention the high levels of inflation we have witnessed over the past few years. Tax hikes look like they are looming on the horizon and the world feels like a volatile place, with Donald Trump’s trade war and geopolitical risks threatening to push inflation higher and dampen growth.

While interest rates have been coming down, they remain high, putting pressure on those with large debts and mortgages too.

“As the country waits for the next interest rate decision, falling domestic energy bills from the start of this month may ease household costs to some extent, though the energy price cap remains 10% higher than a year ago,” said Alice Haine, personal finance analyst at investment platform Bestinvest.

“For those still struggling with everyday bills or weighed down by job security concerns, keeping expenditure lower than household income is the simplest step towards a more secure financial future,” she added.

“Pausing big-ticket purchases, cancelling unwanted subscriptions, slashing non-essential expenditure, shifting expensive debts to a 0% balance transfer credit card and building up some reserve funds to cover unexpected expenses can also help to keep budgets in balance when prices remain elevated.

Deutsche Bank: “An uncomfortable print for the BoE”

Yesterday, we wrote a post on this page about the challenging tightrope the Bank of England has to walk. As well as being responsible for keeping inflation in check, the Bank needs to support economic growth.

Keeping interest rates high might help bring inflation down, but it also puts pressure on the economy. Recently, we have seen signs of a slowdown in the jobs market and two consecutive months of GDP drops. As a result, a rate cut is widely expected when the Bank next meets on 7 August.

Today’s inflation report doesn’t make life any easier for the Bank of England, though. Deutsche Bank has called it “an uncomfortable print”. The headline rate of inflation came in above the BoE’s expectations, and so did other key metrics like services inflation.

“What does this mean for the Monetary Policy Committee (MPC)? Perhaps given the focus on the labour market, tomorrow's data may hold more weight when it comes to shaping the monetary policy outlook. But today's data won't give the MPC any sense of comfort on the inflation side,” said Sanjay Raja, Deutsche Bank’s chief UK economist.

“Is an August rate cut in jeopardy? No, we don't think so. There's enough of a slowdown in GDP and the labour market to warrant a 'gradual and careful' easing of monetary policy. But the onus now rests on the labour market to shape how far and how fast the MPC can cut this year and next.”

How quickly will inflation recede?

The Bank of England thinks inflation will remain at elevated levels for the rest of the year, potentially inching up to 3.7% in September before falling back towards the 2% target in 2026. But there are a number of unknowns.

“Labour market data suggests the UK economy is now starting to struggle. A slowdown would ordinarily suppress inflation, but still-high wage inflation is muddying the waters. That metric remains inconsistent with the BoE’s 2% inflation target, at around 5%, and the extra spending power in parts of the workforce is still running counter to the wider trends of economic slowdown and job losses,” said Rob Morgan, chief investment analyst at wealth management firm Charles Stanley.

“Increases in the minimum wage and payroll tax have raised total labour costs and many businesses are passing these onto consumers. This is likely to keep inflation significantly over 3% for the rest of the year, making it difficult for the BoE to cut interest rates aggressively,” he added.

On top of this, tariffs are creating a sense of uncertainty. Essentially a tax on trade (paid by importers), tariffs are expected to push inflation higher in the US. This could have a contagion effect as other countries respond with retaliatory measures and costs are pushed up throughout global supply chains, causing inflation to rise elsewhere too.

It could also go the other way, though. If tariffs put the brakes on economic growth, the effect in the UK could be disinflationary. “At the very least the ambiguity makes it difficult for companies to plan and invest and, at worst, [tariffs] could exacerbate an economic slowdown,” Morgan said.

What does the inflation jump mean for mortgages?

Today’s inflation surprise isn’t great news for mortgage borrowers, although it is unlikely to derail the chances of an August interest rate cut, particularly if tomorrow’s labour market data shows a continued slowdown in the jobs market.

Recently, mortgage rates have been ticking downwards, reflecting the market’s confidence that there will be around two more base rate cuts before the end of the year. Market competition between lenders has helped too.

“Today’s news could take a bit of momentum out of those reductions but may not be enough to make a major reversal in those mortgage rate improvements,” said David Hollingworth, associate director at broker L&C Mortgages.

The average 2-year fixed residential mortgage rate is currently 5.03%, according to financial information company Moneyfacts. The average 5-year rate is 5.02%. Many borrowers will be able to secure a better rate by shopping around.

Mortgages: millions could see monthly repayments rise, despite falling rates

Recent drops in mortgage rates will bring little comfort to those coming off a relatively cheap deal agreed before rates started rising in 2021. Their monthly repayments are likely to jump when they refinance, as the low rate they locked in several years ago will come to an end.

Although mortgage rates are cheaper than they were two years ago, they remain significantly higher than the levels seen for more than a decade after 2008.

Around 1.6 million fixed-rate deals are due to come to an end in 2025, according to trade association UK Finance. Meanwhile, the Bank of England has calculated 3.6 million mortgages are due to be renegotiated during the next three years, amounting to 41% of all outstanding home loans.

Those who are about to come off their previous deal will be hoping for further base rate cuts, but it is worth pointing out that mortgage rates don’t always tumble in tandem with the base rate.

Fixed-rate mortgage deals are priced based on swap rates – another kind of financial instrument. These can move up and down based on other factors like inflation, bond yields and growth expectations.

“Accurate forecasting is going to be tricky, so if you are remortgaging, it pays to lock in a rate as soon as possible – a few months before your deal ends,” said Sarah Coles, head of personal finance at Hargreaves Lansdown.

“That way, if rates rise between then and the end of your deal, you have secured a great rate, and if they fall, you can shop around for a better deal elsewhere.”

Just make sure you read the small print carefully to understand the deadlines and any fees you might lose when ditching a deal.

How have markets responded to June’s inflation jump?

The FTSE 100 has shrugged off this morning’s inflation jump, opening 0.1% higher. The mid-cap FTSE 250, which is more exposed to the domestic economy, fell 0.2%.

UK equities have had a strong year so far in 2025. The FTSE 100 reached a record high on Tuesday, crossing the 9,000-point mark for the first time.

Volatility in the US has prompted some investors to look elsewhere in search of a more diversified opportunity set in recent months. The UK looks undervalued compared to its US and global counterparts, having been unloved since Brexit, making it an attractive proposition to some investors.

As long as we don’t experience a significant growth slowdown, further interest rate cuts could act as a tailwind for equity markets. Most economists expect two more rate cuts from the Bank of England before the end of the year.

When borrowing costs fall, it reduces the burden of debt for businesses, which can help boost investment and profitability. It also eases pressure on consumers, making them more likely to spend money.

Of course, uncertainties remain. If interest rates are kept restrictive for too long, it can hurt economic growth, resulting in a more challenging environment for businesses. Trump’s trade war could also dampen growth, as could an escalation of the conflict in the Middle East, particularly if it were to result in a sustained increase in oil prices.

“Parts of the gilt market may need to adjust”

Long-dated bonds which mature many years in the future are more exposed to inflation and interest rate risk than short-term bonds. These longer-dated parts of the market could be at risk of a sell off, according to some analysts.

“The persistence of inflation above 3%, well ahead of the Bank of England’s 2% target, highlights the risk that higher inflation is here to stay, and parts of the gilt market need to adjust,” said James Flintoft, head of investment solutions at AJ Bell.

“This comes at a time when there are widespread concerns over the UK’s fiscal path, with the Mansion House speech last night providing little clarity on the situation ahead of the Autumn Budget.

“On top of that, a recent report from the Office for Budget Responsibility highlighted that UK pension schemes, typically a strong supporter of the gilt market, are expected to be selling gilts over the next decade, adding upward pressure to gilt yields.”

In Flintoft’s view, investors holding gilts (traditionally seen as a safe-haven asset in times of volatility) may need to check they are holding the right part of the market. Short-dated bonds could be a safer bet than long-dated ones.

“AJ Bell’s funds use a combination of shorter-dated gilts and US Treasuries to combat the risk that longer-dated bond yields need to move higher, meaning bond prices fall to compensate investors for inflation and fiscal uncertainty,” he said.

“We also hold shorter-dated US TIPS (Treasury Inflation Protected Securities) to help offset inflation in the US, which is also above target and showing the first signs of upward pressure from President Trump’s tariffs.”

What’s happening with house price inflation?

House price data is also published each month on inflation day. Each report from HM Land Registry is released with a six-week time lag, meaning today’s figures cover the 12 months to May.

House prices rose by 3.9% on an annual basis in May, up from a revised estimate of 3.6% in April. It brings the average UK property to £269,000.

“This marks a modest acceleration in annual growth, though it follows a period of volatility when house price inflation slowed as a result of Stamp Duty Land Tax (SDLT) changes introduced in April,” said Holly Tomlinson, financial planner at wealth management firm Quilter.

On a monthly basis, house prices rose by 1.1%.

What does an inflation jump mean for retirees?

A jump in inflation is bad news for retirees as it erodes the value of their pension savings.

Defined contribution pensions do not come with inflation protection, unlike older-style defined benefit schemes. Similarly, those who decide to buy an annuity in retirement could see their income diminished in real terms, if they opt for a level annuity rather than an inflation-linked product.

“Annuity incomes have inched down slightly but are currently delivering good value – a 65-year-old with a £100,000 pension can currently get up to £7,793 per year from a single-life level annuity with a five-year guarantee,” said Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.

“This may seem like enough to meet your needs, but given that level annuities don’t increase, you need to think about whether it’s going to give you what you need over the long term. A spike in inflation could do real damage to your budget.”

The downside with inflation-linked products is that the starting incomes are much lower. Data from Hargreaves Lansdown shows an annuity that escalates by 3% per year gives a starting income of up to £5,789, assuming the same criteria as before.

Private pension income is an important part of most people’s retirement plan, but the state pension also plays an integral role. The good news is this is protected from inflation by the triple lock guarantee. This increases payments each year in line with inflation, wage growth or by 2.5% – whichever is highest. The government has promised to keep this policy in place for at least the duration of this parliament.

Thank you for joining us – plus, some dates for your diary

For those who are following the latest inflation news with interest, here is a list of upcoming CPI report dates for 2025:

• 20 August (covering July)
• 17 September (covering August)
• 22 October (covering September)
• 19 November (covering October)
• 17 December (covering November)
• 21 January 2026 (covering December)

And with that, we are wrapping up our inflation coverage for the day. Thank you for following along.

We will be back again next month, reporting live on the Bank of England's interest rate decision on 7 August. The MPC is widely expected to cut rates. Join us for reaction and analysis.

Summary

• The Bank of England voted to hold rates at their current level of 4.25% today, mirroring the decision made by the US Federal Reserve yesterday.
• The decision was expected. Markets and economists had all but ruled out a cut, as mixed signals in the global economy meant a wait-and-see approach looked more likely.
• The Bank has stuck to a quarterly pace of cuts so far. The last reduction came last month in May.
• Inflation remains high, with the headline figure coming in at 3.4% in May's report, published yesterday.
• The conflict between Israel and Iran has also pushed oil prices up in recent days, which could put upward pressure on energy prices and inflation going forward.

| When will interest rates fall further? | Inflation latest | MPC meeting dates |

Good afternoon and welcome to our live report. The Bank of England will announce its next interest rate decision at midday tomorrow.

Temperatures might be heating up across the UK, but interest rates are likely to be kept on ice. Markets and economists are confident that the Monetary Policy Committee (MPC) will hold rates at 4.25% tomorrow. Stick with us for all the details, including preview analysis today and live reporting tomorrow.

Inflation still coming in hot

The Office for National Statistics (ONS) published May’s inflation report this morning. Prices rose by 3.4% on an annual basis.

This was down from April’s official reading of 3.5%, but this figure was artificially inflated by a car tax blunder from the Department for Transport, meaning it should have been 3.4%. The ONS decided not to revise April’s report, in line with its usual policy.

A reading of 3.4% is still fairly hot. Remember that the Bank of England’s target is 2%.

Inflation briefly returned to target levels last year, before dropping below 2% in September 2024, but higher energy prices have largely been responsible for pushing it back up in the period since.

The Bank of England expects inflation to peak at around 3.7% in September this year before falling back, according to its latest monetary policy report.

“Gradual and careful” approach to interest rate cuts

In recent months, the Bank of England has repeatedly said that it plans to take a “gradual and careful” approach to monetary policy easing. Many have interpreted this as meaning a quarterly pace of rate cuts. This is the pattern we have seen so far:

• August 2024: The first cut this cycle brought rates from 5.25% to 5%.
• November 2024: Rates reduced from 5% to 4.75%.
• February 2025: Rates cut to 4.5%
• May 2025: Rates cut to 4.25%.

The Bank of England has been clear that it doesn’t have any set path in mind, and that it assesses the data on a meeting-by-meeting basis when making decisions.

Pace of rate cuts “now shrouded in a lot more uncertainty”

Speaking to MPs earlier this month, the Bank of England’s governor Andrew Bailey said that the pace and extent of cuts was “now shrouded in a lot more uncertainty” thanks to global trade disruption.

The Bank is currently of the opinion that Donald Trump’s tariffs will reduce global economic activity, lowering export prices and inflation – but Bailey added that this view is “open to interpretation”. If tariffs disrupt supply chains, for example, that could prove inflationary.

The recent escalation of tensions in the Middle East could add to the economic uncertainty, pushing oil prices (and therefore energy prices and inflation) up.

“While it’s unlikely to result in rate hikes, a sustained and/or permanent increase in oil prices could push inflation expectations higher (albeit temporarily). This could open the door to a slower removal of policy restriction going forward,” said Sanjay Raja, chief UK economist at Deutsche Bank.

How many further rate cuts this year?

A “hold” decision is widely expected tomorrow, but how many interest rate cuts can we expect later this year? Experts are divided.

• Research provider Pantheon Macroeconomics expects just one more cut this year, potentially coming in August. It previously thought November, but has brought this date forward after the labour market showed signs of weakening in the latest ONS report. This would bring the base rate to 4%.
• Financial institution ING is expecting quarterly cuts, which would mean two more cuts this year. Its economists think they will come in August and November. This would bring the base rate to 3.75%.
• Deutsche Bank thinks we will see three more cuts, coming in August, November and December. Its economists think weaker pay data could allow the MPC to speed up the pace of rate cuts in the final quarter of the year. This would bring the base rate to 3.5%.

“A smorgasbord of mixed messages”

As well as maintaining price stability, the Bank of England is responsible for supporting growth and employment. This is a tricky tightrope to walk. Bringing inflation under control means keeping interest rates high – but if you do this for too long, households and businesses feel the pinch.

Economists often talk about achieving a “soft landing”. This is when inflation and growth slow without dipping into recession. Timing interest rate cuts perfectly can help achieve this, but it is no easy feat.

Laith Khalaf, head of investment analysis at platform AJ Bell, said the Bank of England currently has “a smorgasbord of mixed messages” to distil. Inflation remains high, tariffs are causing trade disruption, oil prices have spiked as a result of tensions in the Middle East, and growth slumped in April, with GDP dropping 0.3% on a monthly basis.

“Little wonder that at the last meeting of the Monetary Policy Committee (MPC), the committee was split in terms of the direction of monetary policy. Markets are currently pricing in only a 10% chance of a rate cut, with the consensus landing on a rate cut in August or September, and then another one by year end,” he said.

What does it all mean for Rachel Reeves?

The Bank of England sets interest rates independently from the government. This means the chancellor, Rachel Reeves, is not allowed to get involved. That won’t stop her from hoping for further rate cuts though – and sooner rather than later.

When interest rates are high, it is more expensive for the government to borrow money. High borrowing costs and weak economic growth erode the chancellor’s fiscal headroom, otherwise known as the amount of leeway Reeves has to increase spending or cut taxes.

As Paul Johnson, director of the Institute for Fiscal Studies (IFS), has pointed out, Reeves’s fiscal rules are currently being met by a “gnat’s whisker”. If gilt yields rise any further or growth expectations weaken, further tax hikes or spending cuts will be necessary.

Although the base rate isn’t expected to rise at any point in the near future, gilt yields (which represent the cost of government borrowing) could go up if markets start pricing in a “higher for longer” inflation scenario and slower base rate cuts.

This could create a headache for Reeves in the lead-up to the 2025 Autumn Budget.

Would an interest rate “hold” be good news for savers?

Unlike those with debts, savers may be pleased to hear interest rates are expected to hold steady tomorrow. Savings rates have fallen over the past year or so, first in anticipation of base rate cuts and then in response to them.

That said, part of the reason the Bank of England is expected to hold interest rates at their current level is that inflation is proving persistent – and inflation is a saver’s worst nightmare. Savers may now be feeling the pinch.

“Savers continue to be hit by the handful of base rate cuts over the past year as all the top rates for non-ISAs have dropped compared to the market leaders in June 2024,” said Caitlyn Eastell, spokesperson at comparison site Moneyfacts. “Those consumers with a variable-rate account or who have only fixed for a year may now be feeling the pressure.”

Make sure you shop around for the best deal when choosing a savings account or cash ISA. 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 about prospective homeowners shopping for a mortgage?

Prospective homeowners and those looking to remortgage may be disappointed to hear rates are likely to remain on hold tomorrow. However, it is worth pointing out that fixed-rate mortgage deals are priced based on a range of factors, including swap rates. This means they don’t always move in tandem with the base rate.

David Hollingworth, associate director at L&C Mortgages, said mortgage rates have been hard to call in recent weeks. “After a period of fixed rate increases, there’s now a more mixed [picture] with some lenders cutting deals again slightly, as markets find their level,” he said this morning.

“Overall, it looks as though fixed rates may bobble up and down without any significant trend or shift either way. That said there’s clearly a great deal of uncertainty as global events unfold. Borrowers would be better to focus on getting the best available rates and keeping them under review, rather than second guessing the next move in interest rates.”

Remember: if you have a fixed-rate mortgage and are in the middle of your deal, you won’t see any change in your repayments until the fixed period ends, no matter what happens with interest rates tomorrow. The changes we have highlighted here refer to new deals currently available on the market.

Across the pond: will the Fed cut US rates today?

The US Federal Reserve (Fed) is also meeting to discuss interest rates this week. It will announce its decision at 2pm ET today, which is 7pm UK time. The Fed is widely expected to hold rates at their current range of 4.25-4.5%.

Research provider Pantheon Macroeconomics agrees that the Fed will play for time.

“The economy is slowing gradually for now, so policymakers will conclude they can wait for more information on the size, speed and breadth of the uplift to consumer prices from the current tariffs, as well on whether extra tariffs will be imposed this summer,” said Samuel Tombs, Pantheon’s chief US economist.

A hold decision will prove unpopular with US president Donald Trump, who has repeatedly criticised Fed chairman Jerome Powell. Trump believes rates are being cut too slowly. In the lead-up to the presidential election, he promised to relieve pressure on US households by reducing borrowing costs – a decision that lies outside of the president’s power.

How do oil prices impact interest rates?

Oil prices have risen in recent days as tensions escalate in the Middle East – but what have oil prices got to do with interest rates?

Higher oil prices means higher energy prices, and energy underpins the cost of pretty much everything. Bank of England estimates cited by Deutsche Bank suggest a 10% increase in oil prices leads to a 0.2-0.3 percentage-point increase in CPI inflation.

“In a ‘normal’ world, monetary policy would likely see very little reaction to a shift in energy prices. Why? The lags in monetary policy make it a less-optimal tool in dealing with any near-term inflation increase,” said Sanjay Raja, Deutsche Bank’s chief UK economist.

“But we may not be in a ‘normal’ world. Inflation expectations, while receding, remain elevated.”

Raja points out that inflation is still significantly above the Bank of England’s 2% target, with ongoing fears about “second-round effects”. It could push some MPC members to take a more guarded view when it comes to the pace of future rate cuts, in his view.

For now, Deutsche Bank still expects three more rate cuts this year, but economists will be watching the situation closely.

Can we expect further tariff turmoil next month?

Donald Trump’s “Liberation Day” tariffs unleashed chaos in markets at the start of April, before the president backpedalled on the most extreme measures, announcing a 90-day pause. Those 90 days will soon be up.

Trump has previously threatened to reimpose the tariffs on 9 July if countries do not come to an agreement with him. Will he do it?

The UK and US recently announced a trade deal outlining preferential terms on exports like cars and aerospace products, but the UK is currently the only trading partner with an agreement.

The president is famously unpredictable. If he sticks to his original position and imposes higher tariffs on other nations next month, we could see further market turmoil amid fears of a global economic slowdown.

“At the moment it feels like geopolitical tension is breeding,” said Danni Hewson, head of financial analysis at AJ Bell. “While everyone may be clamouring for some jam now in the form of interest rate cuts, central banks must take a more emotionally detached view on the longer-term path of the economy and inflation.”

That concludes our preview analysis for today, but we will be back with more live coverage in the lead-up to the Bank of England’s midday announcement tomorrow. Join us then.

Good morning and welcome back to our live report. The Bank of England will announce its interest rate decision at midday. To recap, here is what is expected:

• The Monetary Policy Committee (MPC) is expected to hold rates at their current level: 4.25%.
• Inflation remained high at 3.4% in May’s report, published yesterday, and geopolitical risks are ramping up again. Against this backdrop, the Bank is likely to take a wait-and-see approach.
• Most economists are expecting at least one more rate cut later this year as the economy slows. GDP slumped by 0.3% in April as higher business taxes and Donald Trump’s tariffs took their toll. Wage growth is still high but is showing signs of slowing. Likewise, unemployment remains low but is starting to pick up.
• Deutsche Bank thinks the MPC will “open the door to an August rate cut” in its meeting minutes and summary today.

Fed decides to hold – despite pressure from Trump

The US Federal Reserve (Fed) held rates for the fourth time at its meeting yesterday, despite pressure from Donald Trump to lower them. Fed chairman Jerome Powell said tariffs were “likely to push up prices and weigh on economic activity”. He added that it was not yet clear whether tariffs would have a short-term impact on inflation, or whether it would prove more persistent. As a result, the Fed is taking a wait-and-see approach.

“For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,” Powell said.

The Bank of England is expected to follow suit today, also holding rates at their current level.

Markets likely to be nonplussed by BoE decision

The FTSE 100 opened around 0.4% lower this morning, but it has little to do with the upcoming Bank of England decision. A hold is widely anticipated and has long been priced in. Investors’ minds are elsewhere.

“Markets have plenty of other things to focus on, namely the Middle East conflict which shows no sign of easing. Equity markets were in the red across Europe and most of Asia as investors were spooked by the escalating conflict and the negative read-across to inflation,” said Russ Mould, investment director at AJ Bell.

“Sticky inflation” could impact mortgage rates

While a hold decision is expected today, most economists think we will see at least one more base rate cut before the year is out. Mortgage rates have come down significantly over the past year or so, but sticky inflation could create some volatility and slow the pace of further drops.

“Sticky inflation and current global pressures can result in a more cautious approach to rate setting, and such uncertainty can impact swap rates,” explains Rachel Springall, finance expert at comparison site Moneyfacts. Swap rates are the financial instruments which underpin mortgage pricing.

Those borrowers who took out a relatively cheap five-year fixed mortgage before interest rates started rising in 2021 will be due to remortgage soon and may be hoping for further base rate cuts before they fix.

But remember: whatever happens with the Bank of England, it could be worth shopping around several months before your current deal expires. Lenders often allow you to lock in a new deal up to six months in advance. Often, you then have the flexibility to ditch the deal before it starts, if a better rate appears in the meantime – although make sure you read the small print, as you might lose any fees you paid.

Interest rate decision due at midday

There are less than 10 minutes to go until the Bank of England announces its interest rate decision. To recap: rates are expected to be held at 4.25%. Stick with us. We’ll bring you the news as it breaks before delving into some analysis. We’ll also dig into the summary documents published by the Bank to give you a flavour of what was discussed, how each member of the committee voted, and where rates might be heading over the rest of 2025.

BREAKING: Bank of England holds rates

Interest rates have been held at 4.25%, as expected.

It comes after inflation remained high at 3.4% in May’s report, published yesterday.

The Monetary Policy Committee is still divided

Six members of the Monetary Policy Committee voted to hold rates. Three members (Swati Dhingra, Dave Ramsden and Alan Taylor) voted to cut the base rate to 4%.

This echoes what we have seen in previous meetings – a divided MPC.

Research provider Pantheon Macroeconomics had forecast a 7-2 split rather than the 6-3 vote that actually materialised. Its economists were not expecting Dave Ramsden to vote for a rate reduction.

"Gradual and careful" message remains

In recent meetings, the Bank of England has repeatedly said that it plans to take a "gradual and careful" approach to interest rate cuts. This phrase appeared in the summary documents and meeting minutes again today.

Some have interpreted this as meaning quarterly cuts, which is the pattern we have seen so far. However, the Bank has been clear that monetary policy is on no "pre-set path".

MPC took note of weaker labour market conditions

Since the last Monetary Policy Committee (MPC) meeting, we have seen evidence of some weakening in the labour market. Wage growth is still high, but has been slowing. Unemployment is still low, but has been rising.

The Bank of England needs the labour market to slow down in order to deliver further interest rate cuts. Part of the reason for this is that wage growth is a big driver of inflation.

The MPC noted these developments. Seemingly, they contributed to the decision of three members to vote for a cut. Private sector regular wage growth is one area that was flagged. This came in lower than expected in the latest report. The Bank also said that incoming pay settlements were in line with its expectations, and were "approaching sustainable rates".

"Global uncertainty remains elevated"

The Bank of England acknowledged that geopolitical risks have risen as a result of the conflict between Israel and Iran. This could have ramifications for inflation and monetary policy, particularly given the spike in oil prices.

"The committee will remain sensitive to heightened unpredictability in the economic and geopolitical environment, and will continue to update its assessment of risks to the economy," the Bank said.

Impact of Trump's tariffs is "evident"

The Monetary Policy Committee (MPC) said the impact of Donald Trump's tariffs had been "evident" in the data it observed during this month's meeting.

It saw evidence of front-loading in the first quarter of the year, as some importers in the US tried to get ahead of the tariffs, stockpiling goods in advance. It expects this to unwind in the second quarter data, after the tariffs kicked in.

Separate data published by the Office for National Statistics shows the UK economy slumped by 0.3% in April, as trade tariffs and higher domestic business taxes kicked in. We should get a better sense of the longer-term trend over the months to come, as more data is published.

That said, the Bank acknowledged that the worst tariff measures announced in April have now been dialled back. The reduction in tariffs with China has reduced the average US tariff rate by just over a third, in the MPC's view.

In its latest survey of UK chief financial offers (CFOs), the bank also found that most companies were "not expecting tariffs to have a material impact on their sales and investment". CFOs also said they felt uncertainty around US tariffs had fallen between the months of April and May.

"The surprise? A third dissenter"

In the words of Sanjay Raja, Deutsche Bank's chief UK economist, today's decision was "never really about a rate change". Bank of England watchers ruled that possibility out long ago.

What economists were really looking out for was signs of any future guidance. And the 6-3 voting split could give a clue.

One of the biggest surprises today was Dave Ramsden's decision to vote for a cut. Unlike Swati Dhingra and Alan Taylor, whose votes were widely anticipated, commentators were not expecting Ramsden to turn dovish.

"Clearly, Ramsden is putting more weight on recent labour market dynamics," Raja said.

Remember that wage growth slowed and unemployment ticked up in the latest labour market report. The number of job vacancies also dropped by 63,000 over the quarter (February-April), and ONS survey data showed that some firms are not recruiting new workers or replacing those who have left.

In other words, the economy is showing signs of cooling.

"It's not all dovish"

Dave Ramsden might have unexpectedly voted for a cut, but economists have warned against interpreting this as a major shift in tone among the Monetary Policy Committee.

"It's not all dovish," said Sanjay Raja, Deutsche Bank's chief UK economist. "There was still a nod to supply side constraints (i.e. weaker productivity, the trade war, and so on)."

"The MPC also explicitly stated that it would remain 'vigilant' about recent geopolitical news on energy and what this would mean for inflation expectations," he added.

"The rise in food prices has also caught the attention of the majority of the MPC."

What does today's decision mean for your personal finances?

Let's now turn our attention to the pound in your pocket. What does the Bank of England's decision mean for your personal finances? Stick with us as we share our analysis over the next few posts.

Annuity rates remain attractive

We shared some analysis on savings and mortgages yesterday (scroll for previous blog posts), so let's start with annuities today.

Those who aren't familiar with this sort of retirement product can check out our annuities guide, but it's essentially a contract you buy from an insurer which gives you a guaranteed income in retirement. You can use some or all of your pension savings to purchase it.

For many years after the global financial crisis, annuities were out of fashion as the rates they offered were poor, but a higher interest rate environment has brought them back into vogue.

"Today’s interest rate hold will contribute to a sustained period of success in the annuity market, said Helen Morrissey, head of retirement analysis at Hargreaves Lansdown. "The latest data from our annuity search engine shows a 65-year-old with a £100,000 pension can now get up to £7,900 per year from a single-life level annuity with a five-year guarantee."

"After a period in the doldrums, the market has roared back to life off the back of interest rate increases and soaring gilt yields. While incomes haven’t continued to rise at the rate they did a couple of years ago, the market is delivering real value for retirees on the hunt for a guaranteed income," she added.

If you are thinking about buying an annuity, make sure you shop around to secure the best rates on the market. Recent analysis suggests the cost of not shopping around can come to a whopping £8,000 over a period of 20 years – a large amount of money for a small amount of research.

Also bear in mind that purchasing an annuity is an irreversible decision, so it is usually worth seeking financial advice or guidance before making a decision. The free government-backed service Pension Wise is a good place to start as you approach retirement.

1.6 million mortgages due to expire in 2025

Around 1.6 million households will see their fixed-rate mortgage deal come to an end this year, according to trade association UK Finance. Those coming off a relatively cheap deal agreed before rates started rising in 2021 could see their monthly repayments jump significantly. They will be hoping that further base rate cuts materialise – and sooner rather than later.

"For existing borrowers rolling off cheap five and 10-year fixed-rate deals, the financial hit from higher mortgage costs will hurt," said Alice Haine, personal finance analyst at investment platform Bestinvest. "This is where a reputable independent mortgage broker can be worth their weight in gold, helping to source the right solution for a borrower’s unique needs."

Choosing how long to fix your mortgage for is one consideration.

Haine points out that the gap between the average two and five-year fixed rate deals has now narrowed to the lowest level since October 2022 (when the inversion began and longer fixed terms became more expensive).

This means a five-year fix is now only slightly more expensive than a two-year fix – a consequence of rates coming down and markets pricing in further interest rate cuts over the months to come.

There are several considerations to weigh up. A five-year deal gives you certainty for longer, but you also take on the risk that rates fall further over the lifetime of the product. If this happens, then a two-year deal could end up saving you money over the long run, as you will be able to remortgage sooner when rates are lower.

"However painful an increase, those looking to refinance should not delay locking in a fresh deal, otherwise they risk reverting to their lender’s standard variable rate (SVR). The average SVR may have dropped from its peak of 8.19% (end of 2023), but it remains high at 7.48%," said Haine.

Poll: tell us your thoughts

Do you want interest rates to fall more quickly? Perhaps you are a prospective homeowner looking to take out a first mortgage, or an existing owner looking to refinance? Or, do you want rates to remain at their current level? Perhaps you have significant savings and are enjoying higher returns. Share your thoughts in our poll.

Shop around for an inflation-busting savings account

Savings rates have been falling and, even though the Bank of England voted to hold rates today, the top savings deals will probably continue to disappear over the coming months. This is because further interest rate cuts are on the horizon. Most economists expect at least one more this year.

The average easy-access savings rate is now 2.67%, which is lower than inflation (3.4%). If you are earning a rate this low, your savings are being eroded. Shop around for an inflation-busting rate. The top accounts currently offer up to 5% AER – although make sure to read the terms and conditions carefully, as some of the most attractive-looking deals include a temporary bonus rate.

Today’s pause also offers a good opportunity for savers to lock in higher rates while they stick around. If you have a pot of cash that you are happy to put away for a year or so, consider opening a fixed-rate account. That way, you will be protected against future rate cuts.

What is stagflation – and are we heading for it?

With inflation still high, interest rates restrictive, and growth slowing, some have raised questions about whether the UK economy is heading for stagflation. Tensions in the Middle East, rising energy prices, and the potential for a tariff-related economic slowdown have all heightened these fears.

That said, there is no reason to panic. The Bank of England has been clear that it thinks the inflation resurgence will be short-lived. It expects it to peak at around 3.7% in September before falling back. Although growth has been slowing, and dipped into negative territory in April, the economy has also proved fairly resilient so far.

The OECD think-tank has forecast a growth rate of 1.3% for the UK in 2025 and 1% in 2026 – far from awe inspiring but also fairly consistent with what we have seen in recent years. The economy grew by 1.1% in 2024, for example.

Thank you for joining us – and upcoming MPC dates

That concludes our live coverage on interest rates. Thank you for joining us. Before we go, some dates for your diary.

There are four more Monetary Policy Committee (MPC) meetings before the end of the year. These will take place on the following dates:

• 7 August
• 18 September
• 6 November
• 18 December

Economists are divided on how many more rate cuts we will see over the course of these meetings.

Research provider Pantheon Macroeconomics is expecting just one more, potentially coming in August. Financial institution ING thinks we will see two more, coming in August and November.

Deutsche Bank is more bullish in its outlook – making it a bit of an outlier – and thinks there could be three, with the pace of policy easing picking up later in the year if pay growth continues to slow.

Summary

• The Office for National Statistics (ONS) released UK inflation data for the year to May 2025 today (18 June);
• CPI hit 3.4% for May, in line with expectations and down slightly from the previous month;
• Slowing transport inflation offset a rise in furniture and household goods prices;
• Chancellor Rachel Reeves says there is "more to do" to bring inflation under control;
• The Bank of England (BoE) expects inflation to rise to 3.7% by September;
• The Consumer Prices Index (CPI) measures changes in the cost of everyday goods and services;
• CPI jumped to 3.5% in April.

| What is inflation? | CPI versus RPI inflation | Upcoming CPI release dates |

Good afternoon and welcome to MoneyWeek’s rolling coverage of the latest UK inflation figures.

With the release of May inflation data scheduled for tomorrow morning (18 June), we’ll bring you live previews of the announcement, as well as rolling coverage and reaction after the release.

What do analysts expect for UK inflation in May?

Analysts at the Bank of England (BoE) expect the headline CPI figure to come in at 3.4% for May, down slightly from its April reading. The consensus expectation among analysts polled by FactSet is slightly higher at 3.5%.

That suggests inflation will remain well above the 2% figure that the Monetary Policy Committee (MPC) targets.

BoE forecasts currently project inflation to increase to 3.7% in September. However, inflation is then expected to fall to around 2.4% by Q2 2026.

When is May UK inflation data announced?

The Office for National Statistics (ONS) will release May inflation data tomorrow morning (18 June) at 7am.

Join us live then for breaking news on the headline figures as well as deeper analysis of the report.

What is the Consumer Prices Index?

The Consumer Prices Index (CPI) is the official measure of inflation that policymakers and analysts tend to focus on. Most central banks, including the BoE, target a CPI rate of 2%.

It isn’t the only measure of inflation, though. There is also the Retail Prices Index (RPI), which includes costs of home ownership as well as the prices measured by CPI.

There is also the Consumer Prices Index including owner occupiers’ housing costs (CPIH). This measures inflation with the costs of owning, maintaining and living in a home included – as such, it has similar characteristics to RPI. While the methodologies used to calculate each are currently different, the two will be fully aligned from February 2031.

Read more about the different inflation metrics here: CPI versus RPI inflation.

Why May inflation might be lower than expected

While the BoE expects inflation to come in at 3.4%, economists at Oxford Economics are expecting CPI to come in slightly lower at 3.3%.

“April's surprisingly strong reading in the services category should partially unwind in May's data,” said Edward Allenby, economist at Oxford Economics. “This is because the outturn was artificially boosted by an unusually large increase in vehicle excise duty sub-category, which the Office for National Statistics has since revealed was due to an error in the data supplied by the Department for Transport and will be corrected in May's release.

“Furthermore, April's rise in services prices was also exaggerated by a very high reading in the air fares sub-category, as the month's collection dates coincided with the Easter holiday unlike in 2024. The upward pressure from this effect should also unwind in May's data. We expect minimal movements in the other major inflation categories.”

Charles Stanley: households are feeling the strain of inflation

Monthly inflation data reports give all sorts of information to policymakers, particularly those involved in setting interest rates. That in turn has a knock-on effect on various other important areas of your finances, like mortgage rates or the performance of the stock market.

But inflation is felt by everyone far more keenly and directly than this, in real-time, because it is a direct measure of how much we pay for the goods and services we use everyday.

The jump in inflation during April, to 3.5% from 2.6% in March, reflected a ramping up of these costs.

“Household finances are under renewed strain,” says Rob Morgan, chief investment analyst at Charles Stanley. “Although average wages have been trending higher, mounting expenditure on bills and groceries, plus higher mortgage costs for many thanks to higher interest rates, means extra income is typically spent on essentials rather than saved.”

April’s figure was elevated by the impact of increased employer costs, such as higher minimum wages and National Insurance payments. The hope is that the impact of these will fade over time.

“While services inflation stands to remain elevated in the short term thanks to increased employer costs, it is a factor that should fade as the months roll by as companies scale back hiring and restrain pay where possible,” says Morgan.

Read more about what inflation is and how it affects you here: What is inflation?

Good morning, and welcome back to our UK inflation live blog. Just under 15 minutes to go until the ONS releases the latest inflation data.

As a reminder, most observers expect inflation to have been around 3.4% in the 12 months to May. Stay here for live updates as it happens.

BREAKING: Inflation hit 3.4% during May

The ONS has released May’s inflation data, and the headline CPI figure comes in at 3.4% for the 12 months to then.

CPIH, which includes the costs of owning, maintaining and living in a house, hit 4.0%..

More detail and analysis on the way.

Transport pricing mitigates food and furniture inflation

That slight easing in headline inflation rates between April and May appears to have been driven largely by a slowdown in transportation price rises.

Transport costs increased 3.3% in the year to April, but just 0.7% in the year to May.

That offset an increase in prices of furniture and household goods, which fell 0.5% in the year to April, but rose 0.8% in the year to May.

ONS chief economist: inflation "little changed in May"

“A variety of counteracting price movements meant inflation was little changed in May,” said Richard Heys, acting chief economist at the ONS.

“Air fares fell this month, compared with a large rise at the same time last year, as the timing of Easter and school holidays affected pricing. Meanwhile, motor fuel costs also saw a drop.

“These were partially offset by rising food prices, particularly items such as chocolates and meat products. The cost of furniture and household goods, including fridge freezers and vacuum cleaners, also increased.”

Other May inflation metrics

As a recap, headline CPI inflation came in at 3.4% over the 12 months to May; in other words, consumer prices according to this methodology were 3.4% higher in May 2025 than a year before. Likewise. CPIH (which includes home ownership and maintenance costs) was 4.0%.

Core CPI – a variant of the headline metric which excludes energy, food, alcohol and tobacco (as these are typically more volatile) increased 3.5% in the 12 months to May, down from 3.8% the month before.

Encouragingly, CPI services inflation slowed considerably from 5.4% in April to 4.7% in May.

Compared to the month before, CPI rose by 0.2% in May 2025.

Easing CPI inflation is “good news” for Reeves but rising food costs a concern

“Easing inflation may be relatively good news for chancellor Rachel Reeves who bangs the drum of stability, but prices remain elevated and well above the Bank of England’s target of 2%,” said Alice Haine, personal finance analyst at Bestinvest, an online investment platform from Evelyn Partners.

“The main driver behind the lower headline rate was falling transport inflation, a reflection of falling air fares after the Easter break and an error in the tax figures provided by the Department of Transport for the ONS’s April inflation data,” Haine adds.

“Worryingly, food inflation bucked the trend and rose to 4.4% from 3.4% in April as supermarkets came under pressure from rising costs.”

Reeves responds to May inflation figures

The chancellor of the exchequer, Rachel Reeves, has responded to today’s inflation reading.

“Our number one mission is to put more money in the pockets of working people,” Reeves said. “We took the necessary choices to stabilise the public finances and get inflation under control after the double digit increases we saw under the previous government, but we know there’s more to do.”

Reeves' statement highlights last week’s £3 bus fare cap extension and increase to free school meals. “This government is investing in Britain’s renewal to make working people better off,” Reeves said.

Middle East turmoil could push inflation higher

While higher food and drinks costs have impacted May’s headline CPI figure, the real danger ahead could be the impact of the brewing conflict in the Middle East on energy prices, according to Nicholas Hyett, investment manager at Wealth Club.

“The net result is that UK inflation remains high, and far higher than elsewhere in Europe,” said Hyett. “That is unwelcome but not unexpected.

“The hope was that price increase would slowly roll off over the course of the next 12 months as we annualise things like council tax hikes and the effect of April's higher labour costs. The turmoil in the Middle East has upset that.”

Oil prices are on the rise as a result of the turmoil, and Hyett highlights that global energy flows could become disrupted if the conflict expands.

“As a key input into pretty much everything, a spike in oil would drive up prices across the board.”

Correction means inflation effectively held steady in May

As expected, today’s release has included a revision to last month’s headline figure as a result of an error in the Vehicle Excise Duty (VED) component, which added 0.1 percentage points onto the headline rate last month.

Once that is accounted for, “inflation in May effectively held steady”, said Myron Jobson, senior personal finance analyst at Interactive Investor.

“Looking beyond the headline figure, core inflation… eased as expected,” Jobson added. “It is important to remember that inflation affects everyone differently.

“We all have a personal inflation rate because our spending habits vary. Depending on the goods and services you buy, your personal inflation rate may be lower - or higher - than the headline figure.”

How does inflation affect your savings?

Inflation has a knock-on effect on all sorts of aspects of your personal finances. It will impact the rate at which certain fixed bills, like your broadband or phone contract, increase each year. Because it informs interest rate decisions, higher inflation can also lead to higher mortgages, as well as higher interest rates on your savings.

While that may sound like higher inflation is good news for savers, the opposite is true. Higher inflation eats into the spending power of the interest that your cash generates.

Many people are unaware of this. Research from Tesco Bank showed that 39% of people are unaware of the impact of inflation on their savings. Within that group, 21% said they didn’t know what impact inflation has on their savings, while 11% believe that higher inflation increases the value of their savings.

“When the rate of inflation is on the up, it means the costs of things in our everyday lives are going up. In turn, our money, and our savings, don’t stretch as far as they once did,” said Chris Henderson, savings and payments director at Tesco Bank.

“While there is no fail-safe way to protect your money from inflation, making sure you are getting the best interest rate on your savings can help,” Henderson added.

The fact that the Bank of England is engaged in an interest rate cutting process further dampens the prospects for savings in the foreseeable future.

“Savers are facing a squeeze,” said Sally Conway, savings expert at Shawbrook. “Inflation is sticking, everyday costs are still rising – and interest rates on many savings accounts have been coming down. With further rate cuts expected, the opportunity to lock in higher returns may not last much longer.”

May inflation recap

Just to recap, here are the headline inflation figures following this morning’s release:

^{Source: Office for National Statistics}

Why inflation is likely to stay high over the summer

The 3.4% headline CPI figure announced today tracks changes in prices over the last 12 months.

So, all 12 data points in that time period will inform the next reading. High-inflation months, where prices rose relatively fast month-over-month, skew the CPI average upwards, while lower-inflation months do the opposite.

There’s some bad news on that front. The monthly inflation increases in June and July 2024 were both very low – July’s, in fact, was negative. These are currently holding the headline annual inflation rate down.

“As these two numbers fall out, the 12-month average will likely increase, hence inflation staying elevated over the summer months,” says Rory McPherson, chief investment officer at Wren Sterling.

As the BoE expects, though, this impact will be transient. “Once that’s passed, we assume a more normal trajectory and then in November (when that big 0.6% reading for October 2024 drops out), we should start to trend down,” McPherson explains. The upshot, he believes, is that “this will likely mean that UK inflation stays above 3% for some time to come before falling back towards 2%”.

How could the Middle East conflict impact inflation?

A slowdown in transport inflation helped keep May’s CPI figure little changed despite rising food prices.

However, George Lagarias, chief economist at Forvis Mazars, fears that this reprieve could be short-lived given the conflict threatening to escalate between Israel and Iran.

“With the war in the Middle East pushing energy prices higher, that transportation offset might very well disappear by the next month,” he says. “Consumers are beginning to feel the heat of inflation again.”

Inflation: the outlook

Today’s inflation reading has changed little in the minds of most experts. September is still expected to see the peak of UK inflation this year.

“Looking ahead, we expect headline inflation to rise gradually in the coming months, and peak in September,” said Edward Allenby, UK economist at Oxford Economics. The BoE’s estimates put inflation peaking at around this time at approximately the 3.7% level.

“From the autumn, inflation is likely to cool as the positive contribution from the energy category disappears," says Allenby. The energy price cap is falling by around 7% for a typical household from 1 July. This reduction in energy prices “should outweigh the impact of sticky services inflation” according to Allenby.

Oxford Economics expects UK inflation to average 3.3% this year, falling to 2.6% in 2026.

What’s happening with housing inflation?

Consumer price inflation wasn’t the ONS’s only inflation announcement today. We’ve also had a separate update on private rent and house price inflation.

In the 12 months to May 2025, average UK monthly private rents increased by 7.0% to £1,339. This rate of inflation is down from 7.4% in the 12 months to April.

“Rental inflation is slowing as demand cools on lower migration and improved affordability for first time buyers rather than any increase in rent supply,” said Richard Donell, executive director of research at property website Zoopla. “We expect the rate of rental inflation to slow in the coming months which will be welcome news for renters.

Average UK house prices increased by 3.5% to £265,000 in the 12 months to April (house price figures typically lag rent and consumer price data by one month). That’s down significantly from 7.0% in the 12 months to March.

“The big decline in the rate of house price inflation reflects the ending of the stamp duty holiday which is now filtering through into slower price growth,” says Donnell. “We expect the rate of price growth to slow further over 2025 as home buyers face a large choice of homes for sale which will support a buyers market.”

Thanks for following

Thanks for following our inflation live blog. We’re going to leave inflation coverage here and instead turn our attention towards tomorrow’s key MPC meeting that will determine interest rates.

How will the MPC digest today's inflation news? Katie Williams will bring you all the answers here.

Summary

• Nvidia rounds off Magnificent Seven results season with an earnings beat;
• Revenue increased 69% year-over-year to $44.1 billion;
• Nvidia’s quarterly earnings per share came in at $0.81, beating analyst expectations but down on the previous quarter for the first time since 2022;
• Nvidia's shares gained 4.9% in after-hours trading following the earnings beat;
• Trump's tariffs have been challenged by a US court, lifting stocks further today.

The team at MoneyWeek is reporting live. Scroll for the latest news and analysis.

| Nvidia shares | Magnificent seven stocks | US-China trade | Tech and AI stocks to watch |

Nvidia's quarterly earnings: the lay of the land

Good morning, and welcome to our live blog covering Nvidia’s earnings release. What a difference a quarter makes.

Three months ago, the question on every investor’s lips was whether Nvidia could defy DeepSeek, the Chinese AI chatbot that appeared to be able to outperform Western models like ChatGPT, without relying on Nvidia’s premium chips.

That now seems a distant memory, with Donald Trump’s ‘Liberation Day’ tariffs having since thrown global markets into turmoil. While the worst of the tariffs are now mostly subject to temporary pauses, the future for the global economy, particularly US-China trade, is far from certain.

Nvidia’s earnings is always one of the highlights of the investing calendar, and the team at MoneyWeek are ready to bring you rolling news and in-depth analysis in the run-up and as the event unfolds. Stay with us for all the updates.

When does Nvidia announce results?

Nvidia’s results will be announced tomorrow (Wednesday 28 May) after markets close in the US, which happens at 9pm in the UK.

Nvidia’s earnings call is scheduled to take place at 2pm PT, which is 10pm in the UK. This is where we’ll hear CEO Jensen Huang discuss the company’s outlook and field calls from analysts. This is where you’d expect to see investors’ big questions, particularly the impact of Trump’s frosty trading relationship with China on Nvidia’s outlook, get answered.

US markets will be closed, but the shares will be traded in after-hours trading, which will give an indication of markets’ initial reaction to Nvidia’s results and management’s comments.

Nvidia’s results: what to expect

So what are we expecting from Nvidia’s upcoming earnings release?

Analysts polled by London Stock Exchange Group (LSEG) expect Nvidia’s earnings per share (EPS) to increase 44.3% year-over-year to $0.88 for the first quarter of its 2026 financial year.

If that figure is accurate, it implies a slight decline quarter-over-quarter, with Nvidia’s Q4 2025 EPS having hit $0.89. That would make it Nvidia’s first quarterly EPS decline since Q2 of its 2023 financial year (which coincided with Putin’s invasion of Ukraine, which significantly dented the performance of technology companies).

Quarterly revenue is expected to increase 65.9% year-over-year to $43.21 billion.

Export controls could cost Nvidia $50 billion

Besides the headline numbers, investors will be particularly interested in the sales of Nvidia’s individual products, particularly its latest generations of AI chips, as well as the impact that trade tensions between the US and China could have on its profits.

“Much attention will fall on the rollout of Blackwell Ultra GPUs – Nvidia’s latest high-performance chips boasting up to 30% better performance and improved efficiency,” says Alex Rudolph, market analyst at IG. “Alongside this, the RTX 50-Series – including the more accessible RTX 5060 – extends Nvidia’s AI push into the consumer space.”

But “geopolitics remains a drag”, Rudolph adds. Nvidia’s CEO Jensen Huang has warned that export controls on its highest-end chips, as part of US government initiatives to restrict China’s access to AI technology that began under Joe Biden, could cost the company $50 billion.

“Recent tariff relief offers a sliver of optimism,” says Rudolph.

Nvidia shares open 2% higher

US markets have started trading for the day, and Nvidia’s shares have opened 2.2% above last week’s close.

Nvidia stock has fallen 0.1% in the year to date, but has staged a recovery since the downturn that Trump’s tariffs instigated, gaining 28% over the past month.

Nvidia developing cheaper Chinese chip

Nvidia is developing a new AI chipset for the Chinese market, which will be priced at around $6,500-8,000, significantly lower than the $10-12,000 that its H20 chips currently sell for, according to sources familiar with the matter cited by Reuters.

If the chip is approved for sale in China, it could “soften the blow” of export restrictions which could cost the business $15 billion in sales next year alone, according to Lale Akoner, global market analyst at eToro.

“The Godfather of AI”: why Nvidia’s earnings matter to you

Why do Nvidia’s results matter to the average investor?

There’s a credible argument that Nvidia is the most important individual stock in the world at present. It is the world’s second-most valuable company by market cap (as of market close on 23 May) and comprises about 6% of the S&P 500, making it the index’s second-largest constituent.

Unlike Microsoft, which currently occupies top spot on both counts, Nvidia is a true bellwether for the AI market, which underpins the investment case for Microsoft and the rest of the Magnificent Seven stocks. It builds the infrastructure for AI, and as such, its performance and outlook are a direct reflection of market confidence in the future of the technology economy, which has been the biggest stock market driver for over a decade.

“There is no company in the world more important to the markets and global investor sentiment than Nvidia,” says Dan Ives, global head of technology research at Wedbush Securities. “The Street [will be] laser focused tomorrow after the bell when we hear April results/guidance from the Godfather of AI Jensen [Huang].”

In a very real sense, the strength of investor sentiment following Nvidia’s earnings release tomorrow will directly impact the tracker funds that, most likely, comprise much of your pension fund – so even if you don’t consider yourself an active investor, you are likely far more exposed to Nvidia’s shares than you realise.

Nvidia’s earnings: investors will look for guidance, says eToro

Investors will be just as focused on the forward-looking numbers – the guidance – as they are on Nvidia’s raw Q1 numbers, which after all are backward-looking at this point.

What the company says it will achieve, and how CEO Jensen Huang and the wider management team respond to analyst questions in the earnings call, will dictate the short-term market reaction to tomorrow’s earnings results.

“The real test lies in [Nvidia’s] guidance and ability to ease investor concerns,” says Lale Akoner, global market analyst at eToro.

Could Middle East make up for Nvidia’s lost China sales?

The US administration is in the process of rewriting the rules surrounding the export of advanced AI chips, like Nvidia’s, to China.

Jensen Huang has been outspoken about the impact of the restrictions, calling them “fundamentally flawed” during a conference in Taiwan last week. Some analysts, though, think that Nvidia will make up for the lost sales thanks to a concerted effort in the Middle East to boost the region’s AI capabilities.

Donald Trump is reported to have negotiated deals allowing Nvidia and rival Advanced Micro Devices (AMD) to export more of their high-end AI chips to US allies in the region, particularly Saudi Arabia and the United Arab Emirates.

These countries “are pouring billions into AI infrastructure, buying hundreds of thousands of GPUs,” says Lale Akoner, global market analyst at eToro.

“This is all part of a regional focus in the Middle East building out datacenters and the AI Revolution which will start to vault UAE, Saudi, Qatar to the priority list for US tech companies,” says Dan Ives, global head of technology research at Wedbush Securities.

Thanks for following the blog today. That's everything from us for now.

Join us tomorrow for more previews of Nvidia's results, plus live coverage of the release itself and the accompanying earnings call.

Good morning, and welcome back for Nvidia's results day. Stay tuned throughout the day for rolling preview, and live analysis this evening as we cover Nvidia's earnings call live.

Nvidia’s shares gain 3% on penultimate session before earnings

Nvidia’s shares made a strong start to yesterday’s session and closed the day out 3.2% up.

Pre-market trading suggests that today could be a different story. Nvidia shares are down 0.2% in pre-market trading this morning.

“A wait-and-see mood looks set to spread on Wall Street,” says Susannah Streeter, head of money and markets, Hargreaves Lansdown. “All eyes will be drawn to Nvidia’s results due out later, and given the trade tariff turmoil which struck in April, there’s an expectation that the numbers and guidance might not be as stellar as investors have become used to.”

Wedbush Securities bullish on Nvidia

California-based financial services firm Wedbush Securities maintains a bullish outlook on Nvidia heading into this earnings release.

Despite the ban on sales of H20 chips to China that came into effect during the quarter, Matt Bryson, managing director at Wedbush, thinks that H20 sales were running ahead of expectations prior to the ban.

“We also believe Blackwell, if anything, has ramped better than anticipated following some initial stumbles,” Bryson adds.

He reiterates an Outperform rating for Nvidia stock as well as a price target of $175, which implies 29.2% upside from yesterday’s close.

Could Nvidia’s earnings fall this quarter?

Nvidia has become one of the dominant stock market players because, for around three years, it has consistently posted huge revenue and earnings increases in its quarterly results.

These have generally exceeded analysts’ expectations, which have struggled to keep pace with Nvidia’s seemingly inexorable rise.

It’s of course impossible for a company to keep growing at the kind of exponential rates that Nvidia posted for much of this run (its earnings per share (EPS) multiplied by more than 12 in the year to Q3 of its fiscal year 2024, i.e. August-October 2023).

The trend has been consistently upwards, though, even if the pace of growth has slowed. But analysts polled by FactSet currently expect Nvidia to post EPS of $0.73 this quarter.

That marks a 19.7% year-over-year increase, but it would imply a drop since the first quarter if it is correct. That would be the first time that Nvidia’s earnings have fallen quarter-over-quarter in almost three years.

Salesforce also announcing results

It isn’t just Nvidia’s earnings that we have to look forward to this evening in the world of big tech. Salesforce is also announcing its quarterly earnings after the bell today.

Analysts polled by FactSet forecast earnings per share (EPS) of $2.55 for the quarter. That implies a 4.5% increase year-over-year.

Salesforce recently announced that it was acquiring Informatica, a data management software firm, for around $8 billion in equity.

Dan Ives, global head of technology research at Wedbush Securities, calls this the “right deal at the right time” for Salesforce.

“We view this deal as a smart and strategic deal for customer acquisition as Infromatica’s strong customer base of over 5,000 customers, including… over 80% of the Fortune 100, leverages this technology for analytics and AI-powered processes which could strengthen CRM’s AI strategy,” Ives adds.

Nvidia shares make cautious start ahead of earnings

US markets have now opened, and Nvidia’s stock began the final session before its earnings release 0.4% above yesterday’s close. However, the stock has since fallen back to around 0.2% below where it closed yesterday.

There is apparently a degree of caution among investors surrounding the chipmaker, which is permeating the wider market. The S&P 500 is trading flat so far.

Recap: What time does Nvidia announce results?

As a reminder, Nvidia’s earnings release is expected after US markets close today, at 9pm BST.

The earnings call, which is likely to include the most relevant details about the company’s future growth expectations and how management expects the simmering trade tensions to impact its business, will start at 10pm BST.

Nvidia’s shares will continue to be traded in after-hours trading until 1am tomorrow. Price movements in Nvidia’s stock during this period will reflect the market’s initial reaction to the earnings release and management commentary.

What do analysts expect from Nvidia’s earnings guidance?

The quarter for which Nvidia is announcing results is to a large extent ancient history. It mostly predates the imposition of tariffs which will likely have a huge bearing on Nvidia’s performance over coming months and, possibly, years.

The immediate mood is likely to be set by the guidance that the business issues for the upcoming quarter. Here’s what analysts polled by FactSet expect on that front:

Nvidia’s stock price movements in after-hours trading could well be informed by management’s statements in relation to these figures, rather than whether or not Nvidia’s results beat or miss the expectations for the quarter just ended.

There's going to be a break in reporting for a little while. We'll post any breaking stories as they come up, but full coverage will resume from 9pm when we'll bring you live coverage of Nvidia's results and earnings call.

China sales ban complicates setup ahead of Nvidia’s results

Welcome back to our live coverage. As we approach the close of US markets, Nvidia stock has fallen around 0.2% today. We should have the financial results within the next hour or so, and these – plus the management comments during the following earnings call – will dictate how the stock looks come tomorrow morning.

The short-term share price reaction is hard to predict. Nvidia could well be about to post its first quarter-over-quarter earnings per share (EPS) decline in almost three years, if analysts are to be believed.

Christopher Rossbach, chief investment officer at J. Stern & Co, isn’t concerned about the impact of a quarterly drop in EPS.

“The issues are due to the ban on selling H20 chips to China and the associated $5.5 billion charge for inventory and purchase commitments Nvidia has made,” Rossbach tells MoneyWeek. The setup ahead of this release is “confusing”, he says, because some analysts have factored this impact in their forecasts, while others haven’t.

“In our view, investors and analysts who follow the company closely have already priced in these factors and should not be unsettled by the headline results,” he says. “The stock should not react significantly to a quarter on quarter revenue decline alone – unless it indicates a notable slowdown. What will matter more for the share price is what Nvidia says about the scale of its fundamental business opportunity.”

Nvidia shares close 0.5% down

Today’s trading has closed; Nvidia’s results are due imminently.

Nvidia stock fell 0.5% today, but will continue to trade for the next four hours in after-hours trading. That’s where we’d expect the earnings-related volatility.

BREAKING: Nvidia beats analyst earnings expectations

Nvidia has announced earnings per share (EPS) of $0.81, on revenue of $44.1 billion, beating FactSet analyst estimates of $0.73 on revenue of $43.3 billion.

Nvidia stock pops 3% on earnings release

Nvidia’s shares have gained 3.1% in after-hours trading on the strength of that release.

More details on the figures to come shortly.

Nvidia’s earnings fall 9% since last quarter

Adjusted EPS has increased 33% year-over-year to $0.81, but that means the stock has slipped by 9% on a quarter-over-quarter basis for the first time since early 2022.

However, Nvidia clarified that absent a $4.5 billion charge for excess inventory and purchase obligations of its H20 chips, which were hit by export controls to China during the quarter, EPS would have been $0.96.

Revenue increased 69% year-over-year to $44.06 billion.

Jensen Huang: AI is becoming infrastructure

In written comments accompanying Nvidia’s results, CEO Jensen Huang said the following:

“Our breakthrough Blackwell NVL72 AI supercomputer – a ‘thinking machine’ designed for reasoning – is now in full-scale production across system makers and cloud service providers,” said Huang.

“Global demand for NVIDIA’s AI infrastructure is incredibly strong. AI inference token generation has surged tenfold in just one year, and as AI agents become mainstream, the demand for AI computing will accelerate.

“Countries around the world are recognizing AI as essential infrastructure — just like electricity and the internet — and NVIDIA stands at the center of this profound transformation,” said Huang.

Nvidia Q2 guidance

Analysts had been expecting Q2 revenue guidance of $45.9 billion ahead of the earnings release.

The results themselves give the following guidance for the next quarter:

Revenue is expected to be $45.0 billion, plus or minus 2%. This outlook reflects a loss in H20 revenue of approximately $8.0 billion due to the recent export control limitations.

So perhaps a little underwhelming on paper. But the theme that is emerging with the results – and will likely persist throughout the earnings call (and the coming weeks) – is that Nvidia is not being shy about quantifying the business costs of the recent trade disruption.

Nvidia earnings call begins

The earnings call is underway. We’ll shortly hear from Nvidia’s CEO Jensen Huang and wider management on the results that have just been announced.

Nvidia CFO: No grace period for H20 export controls

Colette Kress, chief financial officer at Nvidia, has opened the call by diving straight into the impact of the H20 chip export restrictions.

“On April 9, the US government issued new export controls on H20, our data centre GPU designed specifically for the China market," said Kress.

“Although our H20 has been in the market for over a year and does not have a market outside of China, the new export controls on H20 did not provide a grace period to allow us to sell through our inventory.

“In Q1 we recognised $4.6 billion in H20 revenue, which occurred prior to April 9, but also recognised a $4.5 billion charge as we wrote down inventory and purchase obligations tied to orders we had received prior to April 9.”

Kress also included a pointed remark that Nvidia “sold H20 with the approval of the previous administration”.

Blackwell chips account for 70% of data centre revenue

Kress has provided a positive update on the rollout of the latest Blackwell chips, the next generation on from the previous Hopper chips.

“Blackwell contributed nearly 70% of data centre compute revenue in the quarter, with a transition from Hopper nearly complete,” she says.

China revenue will be significantly lower in Q2

Kress has warned that the trade disruption will lead to a significant decrease in revenue from China next quarter.

“China as a percentage of our data centre revenue was slightly below our expectations and down sequentially due to H20 export licensing controls,” she says.

“For Q2 we expect a meaningful decrease in China data centre revenue.”

Jensen Huang: China market effectively closed

Nvidia’s founder and CEO Jensen Huang is now speaking, and is directly attacking the restrictions that are blocking chip exports to the country.

“China is one of the world's largest AI markets and a springboard to global success, with half of the world's AI researchers based there,” says Huang. “The platform that wins China is positioned to lead globally.

“Today, however, the $50 billion China market is effectively closed to US industry.

“As a result, we are taking a multi-billion dollar write-off on inventory that cannot be sold or repurposed,” says Huang.

Huang: China already has AI

Huang goes on to question the rationale of blocking US businesses from exporting AI hardware to China.

“China's AI moves on with or without us,” Huang continues. “It has the compute to train and deploy advanced models.

“The question is not whether China will have AI: it already does. The question is whether one of the world's largest AI markets will run on American platforms. Shielding Chinese chipmakers from US competition only strengthens them abroad and weakens America's position.

“The US has based its policy on the assumption that China cannot make AI chips. That assumption was always questionable, and now it's clearly wrong. China has enormous manufacturing capability,” he says.

Nvidia's place in the America-first agenda

Huang has, however, then stepped back from criticism of White House policy.

“President Trump has outlined a bold vision to reshore advanced manufacturing, create jobs and strengthen national security,” he says. “We share that vision.”

He details the plans that supplier Foxconn has, in partnership with Nvidia, to boost its manufacturing capacity in the US, whilst outlining “our goal, from chip to supercomputer, built in America within a year”.

He has also praised Trump for his role in facilitating the sovereign AI deals, particularly in the Middle East.

“The deals [Trump] announced are wins for America, creating jobs, advancing infrastructure, generating tax revenue and reducing the US trade deficit,” he says.

Huang: AI is the infrastructure of the future

We are now into the analyst questions. Huang is going strong on a line that AI is becoming a form of infrastructure comparable to electricity or the internet, and that Nvidia is building the factories that will produce it.

“We’re clearly at the beginning of the build out of this infrastructure. Every country will have it: that I’m certain of.

“What’s unique about this infrastructure, is it needs factories.”

Nvidia is fully repositioning itself as no longer a manufacturer of chips, but the builder of these AI factories: the supplier of the global utility of the future, as he describes it.

Nvidia stock responds to earnings call

These remarks are going well down with investors. Nvidia's share price has gained 4.6% in after-hours trading.

Could Nvidia develop a new chip for China?

There’s a question on the exact situation regarding export controls to China, and whether or not Nvidia is able to develop a new chip to replace the H20 and export there.

“It’s the end of the road for Hopper,” says Huang. He emphasises that the limits on exports are the key to understanding why they can’t simplify Hopper any further.

“We’re considering it and thinking about it… when the time comes we’ll engage the administration and discuss that,” he says.

The earnings call has now concluded. Nvidia has once again beaten earnings expectations and seen its share price rise in after-hours trading, with investors lapping up the bold vision of the future that CEO Jensen Huang has depicted.

That concludes our coverage for this evening. Thanks for following today, and join us tomorrow for more analysis and reaction to Nvidia's results.

Nvidia shares surge, tariff halt lifts US stocks

Good morning, and welcome back to our coverage of the aftermath of Nvidia’s Q1 results.

Nvidia stock was 4.9% up at the close of after-hours trading yesterday, and is making further gains this morning, trading 5.3% above yesterday’s regular hours close.

That’s in part due to a strong earnings release. But US stock market futures as well as European and Asian stocks have been lifted on news that a US court has moved to block the most stringent of Donald Trump’s tariffs.

Plenty to dive into there given how much trade talk dominated the earnings call last night, as well as analysis of the results themselves. We’ll bring you rolling updates throughout the day: stay tuned!

Sovereign AI boosts Nvidia on earnings call

One of the key themes that Nvidia CEO Jensen Huang stuck to on last night’s earnings call was the idea of sovereign AI, like the huge spending that the Saudi Arabian government has recently committed to.

This agreement, which will see the Kingdom build up to 500 megawatts of AI capacity, will deploy an 18,000 NVIDIA GB300 Grace Blackwell AI supercomputer as its first phase.

“The AI Revolution is heading into its next gear of growth despite the Trump tariff war playing out,” says Dan Ives, global head of technology research at Wedbush Securities. “We also note that the ongoing US/China negotiations could yield positive results for Nvidia over the coming months that could get Nvidia back in the China H20 game.”

Nvidia’s cash pile

It was all about the mood music that came from Nvidia’s management on the call last night.

Despite short-term challenges, the outlook from Huang and Colette Kress, Nvidia’s chief financial officer, painted a robust, bullish and compelling vision of an AI-driven near future, powered of course by Nvidia’s chips.

“Investors came into this quarter looking for signs that Nvidia could alleviate short-term concerns. What they got was a clear message that demand remains robust [and] Blackwell is ramping up fast, says Josh Gilbert, market analyst at eToro.

Gilbert draws attention to the “war chest” of cash that Nvidia has amassed.

Adding nearly $22 billion in cash over the course of a year has given Nvidia “the firepower to keep innovating through R&D, maintain its leadership at the forefront of AI and potentially even reward shareholders with buybacks or dividends,” says Gilbert.

It’s noteworthy that this cash pile has been amassed despite over $14 billion worth of shares having been repurchased in the previous quarter.

AI not the only game in town for Nvidia

With much of the focus understandably on AI, it should not be overlooked that “Nvidia hasn’t forgotten its gaming roots”, says Derren Nathan, head of equity research at Hargreaves Lansdown.

Nvidia “announced that it’s the force behind the latest incarnation of the Nintendo Switch”, says Nathan, as sales of gaming and AI PC chips increased 48% to $3.8 billion during the quarter.

The Nintendo Switch 2 is due for release on 5 June, and “leverages Nvidia's neuro rendering and AI technologies”, according to Nvidia’s chief financial officer Colette Kress, speaking in last night’s earnings call.

Salesforce earnings

Nvidia was not the only big tech company announcing earnings yesterday.

Salesforce also delivered a strong set of results. Revenue of $9.83 billion beat analyst expectations of $9.75 billion, while earnings per share (EPS) came in at $2.58, compared to expectations of $2.55.

Dan Ives, head of global technology research at Wedbush Securities, praised the rollout of Agentforce, Salesforce’s agentic AI model to assist sales professionals, in particular.

“With Agentforce monetisation starting to take hold and bolstering the growth of CRM’s AI strategy, we believe the company is now going on the offensive in scaling this strategy over the next 12-18 months,” said Ives.

Salesforce raised its full year guidance, to $41.0 - 41.3 billion in revenue with a non-GAAP margin of approximately 34%. Wedbush reiterated an Outperform rating and a $425 price target, implying 54% potential upside from yesterday’s close.

Nvidia stock opens 5.5% higher

US stock markets are open, and Nvidia’s share price began trading 5.5% above yesterday’s regular hours close. The news that Trump’s tariff regime could be facing a legal roadblock also appears to have lifted the stock slightly over the gains it made in after-hours trading yesterday.

Nvidia’s political balancing act

Nvidia CEO Jensen Huang clearly had a tricky remit during yesterday’s earnings call.

Certain headline figures that, on paper, would have been hugely disappointing were tied closely and unquestionably to Trump’s trade policy. Particularly, the $4.5 billion charge incurred as a result of bans on H20 chip exports to China, the absence of which would have boosted Nvidia’s quarterly earnings to an impressive $0.96 per share.

“The US has based its policy on the assumption that China cannot make AI chips. That assumption was always questionable, and now it's clearly wrong,” said Huang.

Trump, though, is clearly not a man to upset, and Huang was as careful to praise every aspect of the president’s agenda that he could.

“While Nvidia did talk to the significance of the lost opportunity in China, Jensen [Huang] also appeared to make a concerted effort to credit the current administration for recent sovereign deals, talk to Nvidia’s plans to further US investment (a key touch point for president Trump), while also suggesting management has faith in the US government's likely future actions with regards to trade and AI,” says Matt Bryson, managing director at Wedbush Securities.

“While we believe this approach is likely best suited to minimizing potential political headwinds for NVDA, it also highlights that political decisions (AI diffusion, tariff, and China policies) are seemingly the only potential significant stumbling blocks for NVDA over the next 12+ months,” Bryson added.

How does tariff ruling impact Nvidia?

News this morning that the US Court of International Trade (CIT) has challenged the legal basis for Trump’s tariffs has buoyed stock markets. What does it mean for Nvidia in particular, though?

If the decision survives the upcoming appeal from the Trump administration then one impact would be to reduce Nvidia’s materials costs.

“The decision invalidated much of the Trump-era import duty regime, which had threatened to raise the cost of semiconductor components and other tech hardware, items Nvidia depends on for its high-end AI chips and GPUs,” Kate Leaman, chief market analyst at AvaTrade, tells MoneyWeek.

These increased costs had previously forced Nvidia to raise prices by 10-15%. But in light of the CIT’s ruling, “Nvidia stands to benefit from an immediate drop in import-related expenses… welcome news for a company whose most advanced chips are produced through overseas partners like Taiwan’s TSMC”, adds Leaman.

Should the decision stand, removing the tariffs should give Nvidia greater pricing flexibility and help to preserve its margins.

Thank you for following Nvidia’s earnings news with us. We’re going to end live coverage here for now, but join us again in three months’ time, when Nvidia next announces results.

Summary

• UK inflation hit 3.5% in April, according to this morning's report from the Office for National Statistics (ONS). This is the highest level in over a year.
• The Bank of England had been forecasting a 3.4% reading.
• “Awful April” is largely to blame, with a range of bills going up in April each year, including energy bills, water bills and council tax.
• The inflation report comes less than two weeks after the Bank of England announced its latest interest rate cut, bringing the base rate to 4.25%.
• Since then, the Bank’s chief economist Huw Pill has warned that interest rate cuts have been coming “a little too fast” given developments with inflation.
• Pill voted against the recent cut but was outnumbered by other committee members.

| What is inflation? | CPI versus RPI inflation | Upcoming CPI release dates |

April’s inflation figures due tomorrow

Good afternoon and welcome to our live blog. April’s inflation data will be published tomorrow morning at 7.00am. Brace yourself for a significant jump. The Bank of England thinks the headline rate will rise to 3.4%, up from 2.6% last month.

This would be the fastest rate of annual CPI inflation in over a year. The last time the inflation rate was this high was in February 2024. The good news is that it is expected to be short-lived.

In its latest monetary policy summary, the Bank of England said that “previous increases in energy prices” were “likely to drive up CPI inflation from April onwards”, but that it was “expected to fall back thereafter”.

By this time next year (Q2 2026), the Bank expects inflation to have fallen back to around 2.4%. By the second quarter of 2027, it expects it to be 1.9%. This is below the all-important 2% target.

“Biggest test for the MPC so far this year”

“After an encouraging March report, the April inflation reading will present the biggest test for the MPC so far this year,” said Sanjay Raja, chief UK economist at Deutsche Bank. April’s bill hikes are likely to have pushed the overall inflation rate higher, as well as a later-than-usual Easter weekend. The biggest test will come from elsewhere, though.

The Bank will be watching to see “how the double whammy of the National Living Wage and employer National Insurance Contributions impact price momentum”, Raja said. “We think food, core goods and some services (particularly hospitality and leisure) will be most impacted.”

What about core and services inflation?

The headline rate of CPI inflation is the most commonly-reported metric, but the Bank of England also keeps a close eye on core and services inflation.

• Core CPI excludes volatile measures such as energy, food, alcohol and tobacco. It can give a better sense of how embedded inflation is in the economy.
• Services inflation tells you how much things like educational costs, hospitality costs, and recreational costs have gone up or down. Around 80% of the UK economy is made up of services.

Deutsche Bank thinks core CPI will jump to 3.7%, up from 3.4% last month. It thinks services CPI will rise to 4.9%, up from 4.7%.

ING: “April is always a crazy month for UK inflation”

The economists at financial institution ING think the Bank of England can relax.

UK economist James Smith points out that “April is always a crazy month for UK inflation” because of the annual bill hikes that take place. When you put this to one side, pricing power more generally “seems to be fading”.

“We think the news on services inflation is about to get better. We believe it will be half a percentage point lower by June (roughly 4.2%), well below the BoE’s forecasts, which see it hovering around 5% into the summer,” he added.

This drop will be partly linked to slower rental growth, in ING’s view.

ING also points out that services inflation looks much better when you strip out volatile categories like airfares, holidays and rents. This underlying measure, which ING terms “core services inflation”, is “already tracking at 4% and is likely to head lower over the next few months”, Smith said.

As we established in a previous post, services inflation is an important metric for the Bank of England, because services make up around 80% of the UK economy.

Against this backdrop, ING thinks the Bank could end up cutting rates to a lower level than the market currently anticipates. “Markets are pricing the terminal rate at 3.7%,” Smith said. “We're expecting rates to eventually fall to 3.25%.”

Huw Pill on “the courage not to act”

The Bank of England’s chief economist Huw Pill sounded a more cautious tone in a speech delivered before Barclays today.

He expressed the view that rate cuts have been coming “a little too fast of late”, and defended his “hold” vote earlier this month by talking about “the courage not to act”.

Pill still believes the disinflationary process is intact, but favours a more gradual pace of cuts.

“I am concerned about the potential inflationary impact of structural changes in price and wage-setting behaviour, following the experience of prolonged, well above-target inflation in recent years,” he said.

This could potentially include workers continuing to demand higher pay, or companies continuing to hike prices for longer.

Against this backdrop, Pill believes the quarterly pace of rate cuts we have seen since last summer is too rapid.

What could April’s tax changes mean for inflation?

One thing economists will be watching over the coming months is the impact of recent tax changes on the inflation data.

Chancellor Rachel Reeves raised the rate of employer National Insurance contributions in her Autumn Budget last year. She also lowered the threshold at which employers begin paying the tax. These changes came into effect at the start of the new tax year in April.

A survey of 52 leading retailers, conducted by the British Retail Consortium (BRC) earlier this year, showed two-thirds of businesses were considering raising prices to help offset the cost of the changes.

“Retailers have worked hard to shield their customers from higher costs, but with slow market growth and margins already stretched thin, it is inevitable that consumers will bear some of the burden. The majority of retailers have little choice but to raise prices in response to these increased costs,” said Helen Dickinson, BRC chief executive.

How does inflation affect your cash savings?

With tomorrow’s inflation figures expected to be the highest that the UK has seen in over a year, now is a good time to assess whether your cash savings are doing enough.

Inflation eats away at the purchasing power of your money – as prices rise, your money will not stretch as far as it did before. That’s why it is important to make sure it is growing in one of the best savings accounts.

While you may think this won’t affect you, it is still worth checking.

Recent research from Paragon Bank revealed that 55% of the UK population has money languishing in low-interest savings accounts, with billions of pounds being eroded by inflation.

For example, if inflation was at the Bank of England’s target of 2% and your money was held in a current account accumulating no interest, then your cash would be 2% less powerful.

However, if you instead put that money into a savings account that yielded 2% interest, your money would keep pace with inflation, keeping your purchasing power the same.

Don’t be content with just matching inflation. After a period of high interest rates, many savings accounts offer inflation-busting rates.

The best cash ISA on the market right now, Moneybox’s cash ISA, can grow your savings by 5.71%. When you subtract last month’s inflation reading of 2.6% from this figure, you are left with a real return of 3.11%.

– Daniel Hilton, junior writer

That concludes our preview analysis for today, but we will be back tomorrow morning before the inflation news breaks at 7.00am. Join us then.

Welcome back – less than half an hour to go

Good morning and welcome back to our inflation live blog. There is less than half an hour to go until April’s inflation figures are released. To recap, a big jump is expected following the slew of bill hikes throughout the month.

Stick with us as we bring you all the details, plus what it means for your personal finances.

Recap: which bills went up in April?

April is the main month of the year when household bills go up, and this is expected to contribute to the significant rise in the rate of inflation in this morning’s report. Some of the main price hikes this April included:

• Energy: The typical energy bill rose by £111 per year this April.
• Water: The typical water bill rose by £123 per year.
• Council tax: Council tax bills rose by almost 5% across most local authorities in England, with some councils getting special permission to hike costs by up to 9.99%.

Other services like broadband and mobile phone contracts can see price hikes in April. Depending on when you took your contract out, these can be linked to a previous rate of inflation. Car tax is another example of a cost that went up during the month.

BREAKING: Inflation jumps to 3.5%

Inflation jumped by more than expected, hitting 3.5% in April, up from 2.6% the month before.

Inflation higher than the BoE anticipated

The latest reading is the highest since January 2024. It is also slightly higher than the 3.4% the Bank of England had anticipated. A June interest rate cut was already looking unlikely. This makes it even more so.

Significant jumps in core and services inflation

Core and services inflation also saw big jumps in this morning's report. Core inflation rose from 3.4% to 3.8%, while services inflation rose from 4.7% to 5.4%.

For context, the economists at Deutsche Bank were predicting 3.7% (core) and 4.9% (services), so both forecasts fell short.

These jumps are likely to encourage caution from the Bank of England when it meets again next month to set interest rates.

Housing and household services – the biggest contributor

Unsurprisingly, housing and household services were the biggest contributors to April's inflation jump. The 12-month inflation rate for the sector was 7% in April, up from 5.1% the month before.

Hikes to gas and electricity bills were a key driver, after the Ofgem energy price cap rose by 6.4% at the start of the month.

For the average household paying by direct debt for gas and electricity, this pushed the typical bill up by £111 per year to £1,849.

Water bills added to soaring costs

Water bill hikes were another contributor to April's inflation rise, also captured within the "housing and household services" segment.

"Prices of water and sewerage rose by 26.1% in the month to April 2025 compared with a rise of 8.1% a year ago. This is the largest rise since at least February 1988," the ONS said.

Transport costs pushed higher by car tax and a late Easter

After housing and household services, the transport sector was the biggest contributor to April's inflation jump.

Car tax changes were partly to blame, after some of the rates paid by new petrol and diesel cars doubled in April. Electric vehicles also became eligible for the tax this April.

A late Easter was another factor, resulting in higher airfares being captured in the dataset this month. Airfares rose by 27.5% on a monthly basis, up from 6.5% in the same month a year ago. This is the second-highest monthly rise for April since records began.

"Flights departing in the Easter holidays tend to be more expensive than flights not departing in the Easter holidays," the ONS explains.

"Index day occurred during the Easter holidays in 2025, which made every flight more expensive. However, in 2024 index day occurred after the Easter holidays."

Did the National Insurance hike make a difference?

As we outlined in our preview analysis yesterday, some analysts thought recent changes to employment costs could contribute to a higher rate of inflation this month.

Chancellor Rachel Reeves hiked employers' National Insurance contributions in her Autumn Budget last year, with the changes kicking in this April. Higher minimum wage levels also came into effect.

Some businesses indicated that they were looking to raise their prices in response, to help offset the higher costs now associated with employing workers.

Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, thinks we could be starting to see evidence of this already.

He said: "Rising services and core inflation suggest that the double blow for businesses from the rising National Insurance and National Living Wage has further fuelled underlying price pressures, more than offsetting the downward squeeze from a wilting labour market."

What does the inflation jump mean for your personal finances?

An inflation jump will come as bad news to households up and down the country, but the good news is that you have probably already absorbed the worst of the price increases. Higher bills will have shown up in your account for the first time last month.

The Bank of England doesn't expect this resurgence in inflation to last for long, and it thinks it will peak in the third quarter of this year at around current levels (3.5%).

What's more, there is no suggestion that we are heading back to the darkest days of the cost-of-living crisis, when the annual rate of price increases peaked at 11.1%.

That said, it is also worth pointing out that a slowdown in inflation after this point (Q3 this year) doesn't mean prices are expected to fall overall. They are just expected to rise at a slower rate, closer to the Bank of England's target of 2%.

Unless your wages have kept pace with inflation, this means your purchasing power will have been eroded.

"Personal budgets may come under pressure once again"

"Anyone fortunate enough to have received a pay rise in recent months may have seen a large chunk of that pay increase swallowed up the sharp hikes in household bills and tax – a result of frozen income tax thresholds, which are set to stay firmly in place until at least 2028," said Alice Haine, personal finance analyst at investment platform Bestinvest.

There should be some good news on the horizon when it comes to energy bills, though. As Haine points out, these are one area where price drops are expected over the summer. After rising by 6.4% in April, the Ofgem energy price cap is expected to drop by 7% in July, according to the latest forecasts from consultancy Cornwall Insight.

Haine says it probably won't be enough to move the needle for those suffering the most, though.

"For those still struggling with everyday bills, reviewing budgets to ensure expenditure comes in lower than household income is the simplest strategy, though that can be hard to achieve in reality," she said.

"Putting big-ticket purchases on pause, carrying out an audit of subscriptions and direct debits to cut any wasteful expenditure, and shifting expensive debts onto a 0% balance transfer card are some strategies consumers can employ to keep budgets on track as prices tick up."

Bad news for mortgage rates

Today's larger-than-expected jump in inflation could come as bad news to those looking to take out a mortgage or refinance their debt at the end of a fixed-rate period.

While an inflation jump was widely anticipated – and priced in by markets – the headline figure came in slightly above the 3.4% forecast by the Bank of England.

Core and services inflation were higher than many analysts had predicted too. This could keep the Bank of England cautious, with the base rate potentially staying higher for longer.

Swap rates, which underpin mortgage pricing, often rise when inflation surprises to the upside to reflect this dynamic.

The average two-year fixed mortgage rate is currently 5.11%, according to Moneyfacts. The average five-year deal is 5.07%. Borrowers can usually secure a better rate by shopping around.

"Stagflation is a central banker’s living nightmare"

While a jump in inflation was widely anticipated in today's report, the headline figure was higher than the Bank of England had predicted.

"Even more worrying is the jump in services prices," said George Lagarias, chief economist at financial services company Forvis Mazars.

He calls stagflation a "central banker's living nightmare", and adds that the MPC will now need to choose "whether to support growth or fight inflation by further risking the growth outlook".

The UK economy proved surprisingly resilient in the first quarter of 2025, growing by 0.7%, however many fear that a slowdown is coming, partly driven by the global economic fallout from Trump's tariffs.

Savers facing a double hit of falling rates and rising inflation

The latest inflation reading of 3.5% means fewer savings accounts will now be offering a real return. Check your rate to ensure you are matching inflation, at the very least.

A comparison tool can help you work out whether switching could earn you a better deal.

"Those in low-paying accounts should consider looking beyond mainstream banks," said Sally Conway, savings expert at Shawbrook Bank.

"Specialist providers often offer better returns – and switching could deliver a meaningful boost to your interest income. With rates expected to fall further this year, fixing savings for a year or more could help lock in better value for longer."

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.