Inflation in the U.K. has fallen to its lowest level for more than three years, official figures showed Wednesday, a drop that has cemented market expectations that the Bank of England will lower interest rates at its next policy meeting.
The Office for National Statistics said consumer prices rose 1.7 in September, down from 2.2 the previous month, largely as a result of lower air fares and petrol prices.
The decline was bigger than the 1.9 analysts had anticipated, and means that inflation is below the central bank's target rate of 2 for the first time since 2021.
As a result, the bank's rate-setting panel is expected to further reduce its main interest rate when it meets again in early November to 4.75 from 5. It previously cut borrowing costs in August, the first reduction since the early days of the coronavirus pandemic in early 2020.
"A quarter-point rate cut in November is now effectively a done deal, and this report certainly makes the path to a consecutive cut in December much clearer," said Luke Bartholomew, deputy chief economist at abrdn, formerly Aberdeen Asset Management.
