UK Inflation Holds Steady at 3.8% for Third Consecutive Month

UK Inflation Holds Steady at 3.8% for Third Consecutive Month

2025-10-22 economy

London, Wednesday, 22 October 2025.
The UK’s inflation rate remains at 3.8% in September 2025, defying forecasts of a rise. Bank of England considers interest rate cuts amid economic challenges.

Economic Context and Government Response

The Office for National Statistics (ONS) reported that the UK’s inflation rate held steady at 3.8% in September 2025, confounding predictions of a rise to 4% [1]. This marks the third consecutive month without a change in the rate, which remains significantly above the Bank of England’s target of 2% [2]. In response, Chancellor Rachel Reeves expressed dissatisfaction with the figures, emphasizing the need for government action to support the Bank of England in reducing inflation. The Chancellor is expected to outline a range of policies in the upcoming budget on 26 November 2025, aimed at curbing rising costs [3][4].

Impact on Monetary Policy

The Bank of England’s Monetary Policy Committee, facing a complex economic environment, is scheduled to meet on 6 November 2025 to decide on potential interest rate adjustments. Market expectations have shifted, with some analysts suggesting that rate cuts might occur as early as February 2026, moving forward from the initially anticipated March 2026 [4][5]. Despite the stable inflation rate, factors such as disappointing productivity and sticky wage growth pose challenges, potentially delaying any decisive monetary easing [6].

Sector-specific data indicates varying trends, with food price inflation showing a modest decrease from 5.1% in August to 4.5% in September 2025, offering a small glimmer of hope [2][3]. Meanwhile, transport costs saw an increase to 3.8% year-on-year, reflecting ongoing economic pressures [3]. These mixed signals complicate the Bank of England’s task of calibrating monetary policy to stabilize inflation without stifling economic growth.

International Comparisons and Future Outlook

The UK’s inflation rate remains higher than that of other major economies, with Germany at 2.1%, France at 0.8%, and the European Union averaging 2.4% [2]. As the Bank of England navigates these challenges, economists predict a gradual decline in inflation towards the 2% target through 2026 [5]. The Treasury is also considering measures such as a VAT reduction on energy costs, which could further ease inflationary pressures [6].

Sources


interest rates UK inflation