UK inflation is predicted to reach a 21-month high of 4% in September, driven by increased motor fuel and airfare prices. This figure would be the highest since January 2024, following rates of 3.8% in July and August which were influenced by rising food prices, taxes, and labor costs.
Economists also point to potentially higher prices for clothing and private school fees, with some schools expected to pass on the cost of the government's new 20% VAT rate on private education. While services inflation might soften, the overall increase is expected to place significant pressure on both households and the Bank of England.
This predicted rise in inflation could mark a peak in the cost of living crisis for UK households, with the Bank of England having previously forecast inflation to peak around 4% in September before declining. However, the Bank's chief economist has cautioned against premature interest rate cuts, fearing inflation might remain stubbornly high.
The September inflation rate has significant implications for government spending and benefits, as it is used to determine increases for many welfare payments and is a component of the pension triple lock.... download the app to read more
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