Interest rate cut 'nailed on' after UK inflation falls

A fall in UK inflation below the Bank of England's target rate of 2% 'nails on' a cut in interest rates next month, economists have said.

Yesterday, new official figures showed that inflation dipped to its lowest level since April 2021, staking expectations that Bank of England ratesetters will reduce borrowing costs next month.

The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation fell to 1.7% in September, from 2.2% in August.

The slowdown was driven by a sharp slump in petrol prices and lower airfares.

Inflation for the month was lower than expected, with analysts having predicted a reading of 1.9% for the month.

The September figure is used by the Government to decide a number of tax and spending changes for next year, and means some UK state benefits will rise by 1.7% next year.