UK inflation – live: Relief for Reeves ahead of Budget as inflation rate unexpectedly sticks at 3.8% – UK Times

Commenting on today’s inflation figures for September, ONS Chief Economist Grant Fitzner said:

“A variety of price movements meant inflation was unchanged overall in September.

“The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year.

“These were offset by lower prices for a range of recreational and cultural purchases including live events. The cost of food and non-alcoholic drinks also fell for the first time since May last year.

“Meanwhile, the annual rise in the cost of goods leaving factories continued to increase, driven by higher food prices.”

That’s a slight surprise – the inflation figure is confirmed at 3.8 per cent for September, the same level as during August.

That will be seen as a positive for the government after fears it would rise once more.

Ahead of the inflation data now about to emerge, the CEO of Vital Baby says the omission of certain essentials like baby bottle feeders from the basket of items which make up the calculations makes it further from the truth than reality.

“Young families are generally among the hardest hit financially when prices go up, so to not include baby bottles and other feeding essentials in the nation’s inflation tracker seems out of touch.”

Some of those items are up far more than 4% or so, he says.

Inflation then, before we get the numbers.

For you, it affects the cost of your everyday bills: groceries through food inflation which has been high this year, other costs which are contracted to rise in line with inflation annually.

It’s also the indirect cause of other things you pay – like your mortgages – as when inflation is higher, so too are interest rates typically.

The government’s current struggles are similar.

“Inflation has insidiously woven its tentacles deep into the Treasury’s coffers, ratcheting up interest on the huge debt pile that’s mushroomed since 2020, inflating the cost of benefits and creating an economic backdrop where pay rises were inevitable. The chancellor will likely also have to contend with an expected downgrade to productivity forecasts from the OBR – a measure that had previously been pinpointed as a palatable solution to a decades-long problem,” said Danni Hewson, AJ Bell head of financial analysis.

“Questions remain over how to stimulate growth, make consumers feel confident enough to spend their cash and convince businesses that now is the time to take their foot off the brakes and invest. There are green shoots, with the economy resilient if uninspiring despite external factors like tariffs and geopolitical tensions, but many of the changes already implemented or under consideration are admirably long term.”

Rachel Reeves has said plans to scrap paperwork and “arbitrary rules” for thousands of UK businesses would save firms almost £6 billion a year by the time of the next election.

She set out a package of measures aimed at boosting lacklustre economic growth at the Regional Investment Summit in Birmingham on Tuesday.

The gathering of business leaders and investors came after more gloomy news emerged for the Chancellor as Government borrowing in September hit the highest level for the month in five years.

The data from the Office for National Statistics (ONS) piles more pressure on Ms Reeves ahead of the November 26 Budget, in which she will have to fill a black hole estimated at around £50 billion by some economists.

The biggest gap between government spending and tax revenues in five years will come as another blow to the chancellor – but next month’s Budget is an opportunity for her to win back bond market confidence and, in turn, to lower borrowing costs, writes James Moore.

Tamsin Powell, consumer finance expert at Creditspring, said it might prove a positive for the mid-term – but still a tough situation to deal with in the here and now.

“If the Institute for Fiscal Studies’ forecast proves correct and inflation peaks in September, it will offer some hope that price rises may finally begin to ease. But for many UK households the damage has already been done. Living costs remain high, and families are still feeling the squeeze from months of rising prices across transport, food, and other essentials,” she said.

“For many families, even small increases in prices can deepen financial strain. Wages are still struggling to keep up with the cost of living, and without a savings buffer, a single bill or unexpected cost can cause real stress.

“As we move into winter, rising energy costs and Christmas spending will only add to the pressure. Many households will now be focusing on cutting back and reprioritising essentials, with day-to-day spending decisions becoming more about necessity than choice. Financial resilience is being tested, and small changes – like planning ahead, managing budgets closely, and seeking out support early – will be key to getting through the coming months.”

The first half of the year has seen the government borrow close to £100bn – and with interest rates still high it means Rachel Reeves has a lot of money to raise in the Budget next month.

Budget, debt, interest rates, inflation…it’s all linked and today we get another piece of the puzzle.

Inflation rising means it’s more likely interest rates stay higher, as the Bank of England looks to contain it.

However, higher rates also means higher borrowing costs, meaning more taxes or spending cuts are needed to plug the gaps in public finances.

That’s why Reeves wants productivity and growth up, so Treasury income also increases, and borrowing therefore can be lower. Well, part of the many reasons anyway.

Good morning all. The latest UK inflation figures are set to be released at 7am – we’re expecting another nudge higher to around the 4 per cent level.

That’s predicted to be a short-term peak, but another reminder of the cost pressures families and businesses alike are facing.