The UK's base rate of interest was held at 5.25% in September as the rate of
inflation fell to 6.7% in the year to August 2023.
The fall in the rate of inflation surprised economists, who expected it to rise.
The Consumer Prices Index (CPI) fell from 6.8% in July to 6.7% in August.
Slowing food price increases helped drive the fall, the Office for National
Statistics (ONS) found, particularly prices for eggs, milk and cheese.
Alpesh Paleja, Lead Economist at the Confederation of British Industry (CBI),
said:
'Inflation fell again in August, defying expectations of a slight uptick. We
expect inflation to continue falling over the rest of this year, but the
recent uptick in global oil and domestic fuel prices means that the path
back down may now be bumpier.'
Following the fall in the rate of inflation, interest rates were left unchanged
at 5.25% by the Bank of England's Monetary Policy Committee (MPC).
The MPC had previously raised rates 14 times in a row to tame inflation, leading
to increases in mortgage payments but also higher savings rates.
Shevaun Haviland, Director General of the British Chambers of Commerce (BCC),
said:
'Businesses will be giving a cautious welcome to today's decision by the Bank
of England to hold the base rate at 5.25%. Constant hikes in the
cost-of-borrowing have had a hugely detrimental impact on the firms we
represent.
'Companies need reassurance that decisions on interest rates are not
knee-jerk reactions to the most recent inflation data.
'We need clear direction from decision makers, creating a roadmap for
business that really boosts confidence and investment.'
Internet link: Bank of England website ONS website CBI website BCC website