UK annual inflation rate dropped more than expected in September on falling food prices, data showed Wednesday, delaying the prospect of Bank of England interest rate hikes until after Brexit.
The Consumer Prices Index fell to 2.4 per cent from a six-month high of 2.7 per cent in August, the Office for National Statistics said in a statement.
Analysts’ consensus forecast had been for a dip in the CPI rate to 2.6 per cent.
“The largest downward contribution came from food and non-alcoholic beverages where prices fell between August and September 2018 but rose between the same two months a year ago,” the ONS said regarding the drop.
“Other large downward contributions came from transport, recreation and culture, and clothing.
“Partially offsetting upward contributions came from increases to electricity and gas prices.”
The Bank of England last month voted to leave its main interest rate unchanged, as it noted “greater uncertainty” surrounding Britain’s departure from the European Union set for March next year.
However, the BoE’s Monetary Policy Committee had in August voted unanimously to raise the rate by a quarter-point to 0.75 percent amid Brexit-fuelled UK inflation.
It was only the second hike since the global financial crisis a decade ago and was in response to UK annual inflation holding stubbornly above the BoE’s official 2.0-percent target.
“UK inflationary pressure has eased after increasing for two consecutive months,” Miles Eakers, chief market analyst at foreign exchange group Centtrip, said following Wednesday’s data.
“This should be welcome news for the Bank of England, as rising prices could trigger an interest rate increase, something the central bank looks set to avoid until after a Brexit agreement has been made.
“However, this dip in inflation may be short-lived. Basic wages grew at 3.1 percent in August – the fastest pace in nearly a decade.
“This, in turn, should boost consumer spending, adding to inflationary pressure in the coming months,” Eakers added.
Britain is set to leave the European Union in March even without a divorce deal.
