UK inflation unexpectedly holds at 3.8%

(Sharecast News) - The rate of inflation was unchanged in September, official figures showed on Wednesday, after a jump in airfares was offset by lower prices elsewhere. The cost of food and drink also fell for the first time since May 2024.

According to the Office for National Statistics, the consumer prices index rose by 3.8% in the 12 months to September 2025, unchanged on August.

The rate remains above the Bank of England's long-term target of 2%.

However, it was also better than expected, with most analysts forecasting an increase to 4%.

Core inflation, which strips out the most volatile elements of energy, food, alcohol and tobacco, rose 3.5%, down from August's 3.6%.

Grant Fitzner, chief economist at the ONS, said: "The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year.

"These were offset by lower prices for a range of recreational and cultural purchase, including live events. The cost of food and non-alcoholic drinks also fell."

Food and non-alcoholic drink prices, which have soared in recent months, rose by 4.5%, down on August's 5.1% spike.

The print will provide some relief for chancellor Rachel Reeves, who is due to present her Budget next month.

It also means a further cut in interest rates could be back on the table in November.

The Monetary Policy Committee has cut rates three times this year, to 4%. But it has left rates on hold since August, in light of persistently sticky inflation.

Martin Sartorius, principal economist at the Confederation of British Industry, said: "While some members may prefer to keep rates on hold, given the recent uptick in inflation expectations, September's softer reading could give the broader committee greater confidence to reduce rates without risking further persistence in price pressures."