UK inflation stays higher than expected after oil price jump

Economists had been expecting inflation to fall back to 6.6%.

UK inflation failed to slow as forecast in September as rising oil prices offset downward pressures from food costs.

The Consumer Prices Index rose 6.7% from a year earlier, the same pace as the previous month, the Office for National Statistics said.

Economists had been expecting inflation to fall back to 6.6%.

The miss wasn’t big enough to change the outlook for interest rates after a string of 14 consecutive increases from the Bank of England started to weigh on the economy.

Officials at the central bank are weighing whether they have to do more to return inflation to their 2% goal and meet next on November 2.

At the Monetary Policy Committee’s last meeting in September, officials voted against a rate hike for the first time since November 2021, with the majority of members preferring to wait and see how the economy evolved.

Money-market wagers on further rate hikes held broadly steady, placing a 30% chance on a quarter-point increase next month and more than a 60% probability of such a move by early next year. Markets price 40 basis points of policy easing next year, with the first cut by November.

Paul Dales, chief UK economist at Capital Economics, said it was “disappointing” that CPI failed to fall in September. “But as it is still below the 6.9% rate the Bank of England projected back in August we still think that the Bank won’t raise interest rates again,” he said.

- Bloomberg