UK inflation drops below 2% for first time in three years

16th Oct 2024 07:10

(Sharecast News) - UK inflation dropped sharply in September to its lowest level in two and a half years, according to data from the Office for National Statistics on Wednesday, likely ramping up the pressure on the Bank of England to get more aggressive with monetary easing.

The annual change in the consumer price index (CPI) slowed to just 1.7% last month, down from 2.2% in August. This was well below the 1.9% expected by economists and the first time below the 2% mark since April 2021.

Over the month, CPI was little changed in September compared with 0.3% gain the month before.

The largest downward contributions came from transport (with prices down 3.7% over the month), with larger negative contributions from air fares and motor fuels; while the largest upward contribution came from food and non-alcoholic beverages (up 0.4%).

The annual rate of core inflation, which excludes volatile items like food and energy prices, also fell sharply, from 3.6% to 3.2%, coming in below the 3.4% consensus estimate.

The report follows data released on Tuesday which showed that UK earnings growth fell from 5.1% to 4.9% in the three months to August, its lowest level for more than two years.

"British inflation's downward trajectory, combined with slowing wages growth, emphasises Bank of England Governor Andrew Bailey's latest comments that the bank will get 'more aggressive' on its rate policy," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.