UK annual inflation stays high before key budget

LONDON

Britain's annual inflation rate for September remained far above the Bank of England's target, official data showed Wednesday, keeping pressure on the Labour government before its key budget next month.

The Consumer Prices Index stood at 3.8 percent in September, unchanged from August, the Office for National Statistics (ONS) said in a statement.

While the rate bettered expectations for a rise to 4.0 percent, the Bank of England's target stands at 2.0 percent.

"All of us in government are responsible for supporting the Bank of England in bringing inflation down," finance minister Rachel Reeves said as she expressed disappointment at the latest data.

"I am determined to ensure we support people struggling with higher bills and the cost of living challenges, deliver economic growth and build an economy that works for, and rewards, working people."

However, Reeves has also hinted at tax rises in her budget on November 26 to help balance the books.

Prime Minister Keir Starmer's government increased a tax on businesses in her inaugural budget last October, which experts argue has hindered UK economic growth.

Official data Tuesday showed UK government borrowing reached a five-year high in September.

The ONS on Wednesday said lower prices for recreational and cultural purchases, including live events, had kept a lid on inflation in September.

"The cost of food and non-alcoholic drinks also fell for the first time since May last year," added ONS chief economist Grant Fitzner.

However petrol prices and airfares eased lower than a year earlier.

Economists are meanwhile waiting to see if the steady inflation reading will result in the Bank of England cutting interest rates again this year -- a move that would ease pressure on borrowers but impact savers.

"Inflation remains stubbornly high, reinforcing expectations that the Monetary Policy Committee will hold interest rates steady on November 6," forecast Richard Flax, chief investment officer at Moneyfarm.

"With headline inflation nearly double the target, any talk of rate cuts remains premature."