16 October: Steep Drop From 2.2% Likely To Spur Bank Rate Cut
Prices rose by 1.7% in the year to September, down sharply from 2.2% in August, thanks largely to falling fuel pump prices paid by motorists and lower airfares, writes Kevin Pratt.
This is the first time the annual rate of inflation has been below the Bank of England’s target of 2% since April 2021. It hit a recent peak of 11.1% in October 2022.
Some forecasters expect the Bank to cut its main interest rate from 5% to 4.75% at its next Bank Rate meeting on 7 November. This would stimulate activity by making borrowing cheaper and help ward off any threat of economic stagnation that might accompany a sustained below-target inflation rate.
The European Central Bank cut its main interest rate by 0.25 percentage points to 3.25% on 17 October, saying: “We did this because incoming data show we are well on track to reach our inflation goal.” Inflation in the eurozone in September also stood at 1.7%. The ECB’s target is 2%.
Lindsay James at Quilter Investors said: “With inflation falling below this level and the pace of wage growth slowing, the conditions appear ripe for another rate cut at the Bank of England’s next decision in early November, and maybe even the one after in December too.”
The Bank trimmed the Bank Rate from its recent high of 5.25% in August – the first cut since March 2020, when it reached 0.1%. This summer’s reduction indicated a growing belief that…
