Foreign exchange market data

UK Inflation Falls to 1.7%, Pound Drops Below $1.30, Raising Rate Cut Prospects

Oct 16, 2024, 06:06 AM

UK inflation fell to 1.7% in September, the lowest rate since April 2021 and below the Bank of England's 2% target for the first time in over three years. The decline, down from 2.2% in August, was driven mainly by lower airfares and petrol prices, according to data from the Office for National Statistics. Core inflation, which excludes volatile items, also fell to 3.2% from 3.6%, and services inflation decreased to 4.9% from 5.6%. The CPIH measure of inflation, which includes owner occupiers’ housing costs, fell to 2.6% from 3.1%. The unexpected drop in inflation has increased market expectations for a potential interest rate cut by the Bank of England, with UK rate futures indicating 45 basis points of cuts by the year's end, up from 37 basis points before the data release. The pound fell below $1.30 following the news, reaching a near two-month low, as investors adjusted their bets in favor of more aggressive monetary easing.