Inflation surprise as UK CPI unchanged in September

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

Laura Miller

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.