Inflation unchanged at 6.7%

The latest inflation rate remained flat at 6.7% in September as the impact of higher fuel prices was balanced out by falls in food prices.

Rising prices for petrol and diesel made the largest upward contribution to the change in the annual rates.

The average price of petrol rose by 5.1 pence per litre in the last month to 153.6p per litre in September 2023, while diesel prices were up 6.3p to an average 157.4p per litre. The prices are still at least 13p less than this time a year ago.

The largest downward contributions came from food and non-alcoholic beverages, where prices fell by 1.3% to 12.2% on the month, the first drop since September 2021. The biggest drops were seen in the price of milk, cheese and eggs, and mineral waters, soft drinks and juices. The cost of airfares also fell significantly by 23.2% but the price of hotel accommodation was up 3.4%.

The core CPI figure, which excludes energy, food and alcohol, was 6.1%, down a miniscule 0.1% from August.

Although the overall inflation figure was unchanged on last month, it is significantly lower than the October 2022 high of 11.1%.

The flat figure will contribute to the Bank of England deliberations over whether to hold or raise the base interest rate when it meets in early November.

Nathaniel Casey, investment strategist at Evelyn Partners, said: ‘Despite the recent rise in crude oil prices pushing fuel prices higher, and this pause in monthly falls in annual inflation, we think the broad downward trend in inflation remains intact. The cooling labour market conditions are reducing the risks of a wage price spiral materialising.

‘Although the BoE left the interest rate unchanged at their last monetary policy meeting, money markets continue to price in a 50/50 chance of one more rate hike at some point over the coming quarters. Regardless of whether they deliver one more hike or not, we’re unlikely to see rate cuts materialise before the tail end of 2024.’

The sticky inflation is also hitting businesses as they deal with price pressure and rising fuel costs.

Jonathan Andrew, CEO at Bibby Financial Services, said: ‘The stagnant inflation rate is bad news for UK businesses, especially as our recent research saw 59% of SME owners continue to cite inflation as a key challenge.

‘With inflation remaining around three times higher than target, businesses are having to contend with rising fuel costs, skills shortages and persistently high interest rates as they try to stay afloat. If this wasn’t enough, financing is becoming more expensive and harder to access for many smaller businesses at a time when external support is crucial to their survival.

‘SME owners and decision makers say they want greater tax incentives, less red tape and access to low interest loans or grants and we must see measures that address these challenges in the Autumn Statement next month. Without further support, we’ll likely see many more small businesses being pushed over the edge over the coming months.’

The September inflation rate is normally used to set benefit and state pension rises so it is a critical figure for the Chancellor Jeremy Hunt in the run-up to the Autumn Statement on 22 November.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: ‘The inflation reading is the final part in the triple lock puzzle and puts pensioners on course for an 8.5% increase in state pension next year. Inflation has remained stubbornly high but has come off its double-digit heights to remain at 6.7% in September. However, wages data has remained red hot with average wages, including bonuses, hitting 8.5% during the relevant period.

‘There is a chance we could see further triple lock tinkering this year with the government looking to manage the eye-watering cost by either opting to go with inflation or potentially taking the wages figure without bonuses.’

For information on wages, visit BrAInbox today where you can find answers to questions like What is a deductions from pay agreement and why is this important?

• King’s Speech scheduled for 7 November
• Aberdeen admin assistant jailed over £1.5m fraud
• HR not yet using AI in recruitment
• When is redundancy pay not payable?