Inflation in the º£½ÇÊÓƵ fell more than anticipated last month, dipping below the two per cent target for the first time since April 2021, providing a further boost for the Bank of England.
The consumer price index dropped to 1.7 per cent in September, as reported by the Office for National Statistics (ONS), down from 2.2 per cent in August, as reported by .
This decrease was larger than what economists had predicted, with city traders having expected inflation to fall to 1.9 per cent in September.
Core inflation, which excludes volatile components such as food and energy, also fell to 3.2 per cent, lower than expectations and down from 3.6 per cent the previous month.
"Inflation eased in September to its lowest annual rate in over three years," stated ONS Chief Economist Grant Fitzner.
"Lower airfares and petrol prices were the biggest driver for this month's fall. These were partially offset by increases for food and non-alcoholic drinks, the first time that food price inflation has strengthened since early last year," he added.
The data revealed that services inflation decreased much faster than expected, falling to 4.9 per cent from 5.6 per cent in August. Economists had forecasted services inflation to drop to 5.2 per cent.
Services inflation has been a crucial metric for Bank officials as they strive to comprehend the underlying inflationary dynamics in the economy.
The significant drop suggests that inflationary pressures might be easing quicker than the Bank's most recent forecasts would indicate.
Suren Thiru, ICAEW's economics director, referred to the "notable drop" in inflation, indicating that domestic price pressures were showing signs of becoming "less sticky".
He added: "The squeeze from slower economic activity and weaker wage growth should help keep it on a downward trajectory,".
According to Darren Jones, Chief Secretary to the Treasury, the news that inflation is under two per cent will be "welcome news for millions of families".
The latest September inflation data arrived just a day after new figures pointed towards an additional slowdown in wage growth. This development has increased speculation that the Bank of England might lower interest rates again in November.
In response to the morning's figures, the pound took a sharp nosedive to slightly over $1.30, marking its poorest standing since mid-August. Similarly, gilt yields declined along the curve, signaling that markets are predicting a quicker rate of interest rate reductions.
The Bank of England decreed a cut in rates for the first time since the pandemic this past August, but paused any changes last month, due to ongoing concerns about inflation's tenacity. Currently, the benchmark Bank Rate is set at five per cent.
Within the Bank, opinions are increasingly divided over the correct direction for policy. Andrew Bailey, the Governor, hinted he may advocate a more "activist" stance if the dampening of inflation persists.
Contrastingly, Chief Economist Huw Pill takes a more careful view, remarking that there is "ample reason for caution" regarding interest rates.
Nevertheless, Anna Leach, the Institute of Directors' chief economist, suggested that today's figures "smooth the path to the next rate cut".
Despite inflation dipping below the two per cent target, the Bank's projections indicate a rise to just under three per cent by year-end, driven by escalating gas prices.
