UK September 2024 Inflation Tumbles to 1.7% pa

The Office for National Statistics (ONS) has this morning released inflation figures for the UK for September 2024.

After August and July’s flatline at 2.2% pa, figures show that inflation tumbled a massive 0.5%, from 2.2% pa to 1.7% pa in September.

The largest downward pressure falls in prices came from transport, air fares and motor fuels; but food and non-alcoholic beverages continued to face upward price pressure.

This follows the pattern in the USA where we had (and they still have) stubborn inflation which only marginally fell in September to 2.4% pa from 2.5% pa.

RPI Falls by 0.8%

The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI) and still our preferred measure of real inflation, also fell dramatically to 2.7% pa in September from 3.5% pa in August.  RPI has also been stubborn recently but has consistently been coming down since last year.

Comment

UK stock markets are up and at the time of writing the FTSE 100 is up nearly 1% at 8,339 (just over 1.5% off its record high) and the FTSE 250 also up over 1%.  Sterling has fallen against other major currencies as perhaps the fall in inflation was greater than expected by the Bank of England (and us!) which leaves the door wide open to say one huge, 0.5% rate cut in November or two 0.25% rate cuts in November and December.

This is going to be a tough call.  The Bank of England does not want to strangle the economy back into recession by keeping interest rates too high for too long, but it has to manage our currency risk and cutting interest rates too quickly will mean a weaker pound resulting in imports becoming more expensive (e.g. oil/fuel priced in $) but as a bonus UK exports will become cheaper for other economies importing British goods and services.

Key dates for us all: 

• Next ONS inflation report 20 November 2024.
• Next Bank of England MPC interest rate decisions 7 November 2024 and then 19 December 2024.