Unexpected UK inflation in September causes pound sterling to fall

In September, the UK inflation came in much weaker than expected, causing the pound sterling to fall dramatically.

The Office for National Statistics (ONS) revealed that consumer prices rose 2.4 per cent year-on-year, down from 2.7 per cent rate in August and also below the predictions of City Analysts of 2.6 per cent.

The sector that caused the main downward pull on prices was food, followed by clothing and transport.

The Bank of England increased interest rates in August to 0.75 per cent to try and control the expected building inflationary pressure in the UK economy.

Statistics showed that the pound sterling fell to $1.3140 against the dollar, down 0.33 per cent on the day. Similarly, against the euro the pound was down by 0.24 per cent at €1.1362.

Andrew Wishart of Capital Economics said: “With inflation in line with the Bank of England’s forecast, and measures of domestically generated cost pressures, such as core inflation and services inflation falling back, this reduces any pressure on the [Bank of England] to act again before it can assess the likely impact of the Brexit negotiations.”

According to the ONS, industrial input prices were up to 10.3 per cent, while factory gate prices rose to 3.1 per cent in September, up from 2.9 per cent in August.

It was reported that the annual house price inflation in August eased to 3.2 per cent, down from 3.4 per cent in July.

The ONS stated that average wages, excluding bonuses, were up 3.1 per cent in August, the highest in almost ten years.

Economists said that moderating inflation will increase the purchasing power of those nominal wage increases, helping to boost consumption.