UK Inflation rate remains at 6.7% in September – what it means for your money

THE UK’s rate of inflation remained at 6.7% in September.

The Consumer Price Index level of inflation stayed the same as in August, according to the Office for National Statistics (ONS).

Meanwhile, the Consumer Price Index including owner occupiers’ housing costs rose by 6.3% in the 12 months to September, also unchanged from August.

Inflation remained the same as easing food and drink price rises were offset by higher petrol and diesel prices for motorists.

Analysts had predicted inflation would dip to 6.6% for the month.

September’s inflation rate is set to be important in calculating how much benefits payments will increase next year, as well as outlining increases in some taxes, such as business rates.

It is also good news for pensioners as today’s inflation rate could put them on course for an 8.5% state pension increase.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown said: “Today’s inflation reading is the final part in the triple lock puzzle and puts pensioners on course for an 8.5% increase in state pension next year.

“Inflation has remained stubbornly high but has come off its double-digit heights to remain at 6.7% in September.

“However, wages data has remained red hot with average wages, including bonuses, hitting 8.5% during the relevant period.”

If the state pension does rise by 8.5% then the new full state pension would go up from £203.85 per week to £221.20.

Responding to the news that inflation remains at 6.7%, chief executive of Child Poverty Action Group, Alison Garnham said that it “is no comfort for struggling families”.

She added: “The Government hasn’t said that it will safeguard benefits and ensure they rise at least with inflation.

“Ministers must stop the worry and commit to uprating benefits at least in line with inflation. 

“The alternative is that many more children will be pulled into poverty – their well-being and life chances jeopardised.”

Commenting on today’s inflation figures for August, Grant Fitzner, ONS chief economist said: “After last month’s fall, annual inflation was unchanged in September.

“Food and non-alcoholic drinks prices eased again across a range of items with the cost of household appliances and airfares also falling this month.

He added that these were offset by rising prices for motor fuels and the cost of hotel stays.

Chancellor of the Exchequer, Jeremy Hunt, said: “As we have seen across other G7 countries, inflation rarely falls in a straight line, but if we stick to our plan then we still expect it to keep falling this year.

“Today’s news just shows this is even more important so we can ease the pressure on families and businesses.”

Inflation is a measure of how the price of goods and services has changed over the past year.

In June the rate of inflation dropped much lower than expected to 7.9% from its previous 8.7% in May.

The ONS said that falling prices of motor fuel had led to the biggest contribution to this change.

There was another fall in July when the rate dropped to 6.8%, this was the slowest rate drop since February 2022 though analysts had predicted it would be slightly lower.

August saw another drop to 6.7% in August and the ONS said it was partly down to the fall in the cost of things such as hotel stays or flights.

While the increase in the prices of petrol led to the largest upward contribution to the change in annual rates.

Inflation has fallen back since hitting a 41-year high of 11.1% last October.

What it means for your money

High inflation means that the cost of everyday essentials is rising and therefore your money doesn’t go as far.

When inflation drops it doesn’t mean that prices have stopped rising it just means that they are rising at a slower rate.

The Bank of England (BoE) and the UK’s central bank can hike its base rate to try and bring inflation down.

This is good news for people who have savings, as they might see a boost.

It is bad news for homeowners, as it also means interest rates on mortgages rise meaning more pressure for homeowners.

Ben Thompson, deputy chief executive officer of the Mortgage Advice Bureau, said: “Inflation remains unchanged, adding more pressure on the Bank of England to hold interest rates where they are – at least for the next announcement.

“While rates remain high in comparison to recent history, the rates on offer from a host of big lenders have already reduced to sub 5%.”

He added that as swap rates harden with the possibility of higher for longer interest rates, it is “unlikely” that rates will drop further anytime soon.

Gina Silvester, chief operating officer at wealth app Chip commented that today’s figures show that prices are “still stoking the inflationary fire”.

She added that it was “unlikely many households will feel any heat subside yet” especially heading into winter with rising utility bills.

She said: “However, with rates lower than earlier in the year this does signal some good news for those focused on growing their savings.

“A reduction in day-to-day costs means some opportunity to increase saving for the future.”