KPMG UK has recently shared some insights on the latest inflation data According to Yael Selfin, the Chief Economist at KPMG UK, the unchanged inflation rate ensures interest rate cut remains on the table for the current year. Selfin added that the recent data is encouraging and that it could strengthen the case for a further interest rate cut before the end of 2025.
They also mentioned that while underlying price pressures remain elevated, services inflation came in below the Bank of England’s expectations. As a result of this development, they think the door remains open for one final cut in December this year, particularly “once policymakers have more clarity on fiscal policy following the Budget, in addition to further expected loosening in the labour market.”
They further noted that the upcoming Autumn Budget presents somewhat of a two-sided risk to the current inflation outlook. Selfin also stated that the “repeat of last year’s tax hikes on businesses could potentially put upward pressure on domestic inflation, with firms likely to pass on some of that cost.”
But the Chancellor could opt to hike taxes “on households affecting consumer spending more directly.” They pointed out that the impact of these taxes would likely see household incomes “fall and could be disinflationary on balance.”
Selfin further noted that inflation was unchanged at “3.8% in September, driven by transport prices.” They also pointed out that inflation is now projected to gradually “ease, as recent temporary price pressures fade.” But for now, the exact figures or overall economic outlook remain unclear due to global political and economic uncertainty.
They added that if the recent “decline in oil prices continues, motorists could see lower prices at the pump.” Selfin concluded that overall, KPMG UK now expects inflation to “return to the Bank of England’s 2% target in the first half of 2026.”
