Official announcement from the Bank of England

UK Inflation Falls to 3-Year Low of 1.7%, Below BoE Target, Boosting Rate Cut Prospects

Oct 16, 2024, 05:15 AM

UK inflation fell unexpectedly to 1.7% in September, down from 2.2% in August and below the forecasted 1.9%, marking the lowest rate since April 2021 and the first time it has fallen below the Bank of England's 2% target in over three years. The unexpected drop was driven by lower prices in airfares and petrol. Core inflation, which excludes volatile items, decreased to 3.2%, below expectations of 3.4%, and down from 3.6% the previous month. Services inflation also fell significantly to 4.9% from 5.6%, further easing price pressures in the economy. The data bolsters the case for an interest rate cut by the Bank of England, with money markets now pricing in a 93% chance of a rate cut next month, and over 45 basis points of rate cuts by the end of the year, up from 37 basis points before the data release. Economists suggest that if services inflation continues to decline, rate cuts are likely to accelerate beyond November.