UK Inflation Hits 3-Year Low, Boosting Pensions and Benefits

Strategic Insights -

UK inflation eased to a 1.7% annual rate in September, the lowest level in over three years, as lower airfares and petrol prices took the biggest hit. This reading is below the market's expectation of 1.9% and has significant implications for the upcoming benefit increases and interest rates. The Bank of England's target rate of 2% has not been breached for nearly three years, and policymakers are now expected to consider cutting interest rates from their current 5% level. The UK state pension is set to increase by 4.1% next April due to the triple-lock policy, while state benefits will rise by 1.7% as a result of the September inflation figure. Lower interest rates are expected to benefit households and businesses, particularly those with mortgages and borrowing rates.

Key Takeaways:

  • The UK inflation rate has fallen to 1.7% in the year to September, the lowest level in over three years.
  • Lower airfares and petrol prices were the main drivers behind the fall in inflation.
  • State pensions will increase by 4.1% next April, and state benefits will rise by 1.7% due to the September inflation figure.
  • The Bank of England's target rate of 2% has not been breached for nearly three years, and policymakers are now expected to consider cutting interest rates from their current 5% level.
  • Motor fuels and lubricant prices dropped by 10.4% in September compared to the same month a year earlier.
  • Food and non-alcoholic drink inflation rose to 1.9% in September, amid stronger price increases for milk, cheese, eggs, and fruit.
  • The Retail Prices Index (RPI) rate of inflation slowed to 2.7% from 3.5% in the previous month.

Statistics:

  • UK inflation rate: 1.7% (Year to September 2024)
  • State pension increase: 4.1% (Next April)
  • State benefit increase: 1.7% (Next April)
  • Interest rate: 5% (Current level)
  • Motor fuels and lubricant prices: -10.4% (September 2024 vs. September 2023)
  • Food and non-alcoholic drink inflation: 1.9% (September 2024)

Sources:

  • Office for National Statistics (ONS) (@ONS)

+ "Inflation rate eases to 1.7% in the year to September 2024"

+ https://twitter.com/ONS/status/1206833837453869569

  • Office for National Statistics (ONS) (@ONS)

+ "CPI rose by 1.7% in the 12 months to September 2024, down from 2.2% in August 2024"

+ https://twitter.com/ONS/status/1206833837453869569

  • Good Morning Britain (@GMB)

+ "BREAKING NEWS: The rate of inflation has slowed down to a rise of 1.7% in September which is below the Bank of England's target of 2% for the first time in nearly 3 years"

+ https://twitter.com/GMB/status/1206823393623302144