UK inflation unexpectedly holds steady and bolsters hopes of November rate cut

Core Viewpoint - Inflation in the U.K. remained steady at 3.8% year-on-year as of September, contrary to expectations of an increase, which may support the case for an interest rate cut by the Bank of England next month [1][2][4] Group 1: Inflation Data - The Office for National Statistics reported that consumer prices rose by 3.8% annually, unchanged from the previous two months [1] - Most economists had anticipated an increase to 4%, which would have been double the Bank of England's target [2] Group 2: Economic Outlook - Economists believe that the flat inflation reading suggests that inflation may have peaked and could decline towards the Bank's target in the coming months [2] - Martin Sartorius, a principal economist, indicated that price pressures are expected to ease slowly, with a more significant reduction in inflation likely not occurring until the first half of next year [3] Group 3: Central Bank Implications - The unexpected inflation data raises the possibility of the Bank of England cutting interest rates at its next policy meeting on November 6 [4] - The central bank had previously maintained its main interest rate at 4% due to inflation concerns [4] Group 4: Government Budget Considerations - The inflation figure is significant for Treasury chief Rachel Reeves as she prepares for a crucial budget statement on November 26, where tax increases are anticipated [5] - September's inflation rate will influence welfare benefits for the upcoming year, resulting in lower-than-expected funding costs [5]