United Kingdom Inflation September 2017

United Kingdom

United Kingdom: Inflation reaches a multi-year high in September

October 17, 2017

Consumer prices rose 0.3% in September over the previous month, down from August’s 0.6% rise. September’s figure was largely driven by higher prices for food and non-alcoholic beverages, and clothing and footwear.

Inflation in September ticked up to 3.0% from 2.9% in August, marking the highest rate since March 2012 and matching analysts’ expectations. Annual average inflation increased from 2.1% in August to 2.2% in September. If inflation rises any further, as may well be the case in the coming months, Bank of England Governor Mark Carney would be forced to write a letter to the Chancellor explaining the deviation from the Bank’s 2.0% inflation target. Carney may well need to keep a pen handy, having recently stated he expects inflation to tick up above 3.0% as the weaker sterling since last year’s Brexit vote continues to feed through to prices. Coupled with a tight jobs market—recently released figures showed the unemployment rate at 4.3% in the June-August period—high inflation is fueling expectations of an interest rate rise at the BoE’s November monetary policy meeting.

The Bank of England sees inflation reaching 2.5% in Q4 2018 and 2.2% in Q4 2019. Last month, FocusEconomics Consensus Forecast panelists expected inflation to average 2.5% in 2018 and 2.3% in 2019, as the impact of the depreciation of the currency gradually ebbs. A new Consensus Forecast will be published on 24 October.

Author:, Economist

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United Kingdom Inflation Chart

UnitedKingdom Inflation September 2017 0

Note: Annual and monthly variation of consumer price index in %.
Source: Office for National Statistics (ONS) and FocusEconomics calculations.

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