UK inflation – live: Relief for Reeves ahead of Budget as inflation rate unexpectedly sticks at 3.8%

Expert warns Rachel Reeves to raise major taxes and reform others as he warns of ‘desperate’ situation

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Rachel Reeves remains under pressure despite being a handed a small bonus after data showed inflation remained unchanged in September.

Inflation had been forecast to rise as high as 4 per cent in statistics released on Wednesday, but remained at 3.8%.

Fuel prices have contributed to keeping inflation high, but good news for consumers came with food prices falling for the first time since May last year.

There will still be significant pressure on the government as it prepares to deliver its budget next month, as inflation remains far above the Bank of England’s 2 per cent target.

The Bank has needed to maintain high interest rates in a bid to combat inflation, which has contributed to higher borrowing costs for public finances – which figures yesterday showed have grown by nearly £100bn this year.

A government-set target of 2 per cent inflation is not expected to be seen until at least the latter part of 2026, though many experts have suggested higher inflation and global political instability – along with uncertainty over the UK Budget next month – means that interest rates might not be cut more than once more before the middle of next year.

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The foods which contributed to lower prices

So, food. That’s been a big deal of late given grocery prices rising for what seems like forever.

But hopefully that’s hit a peak now – though discounting contributed to it rather than general cheaper prices.

For food and non-alcoholic beverages, the 12-month change was 4.5 per cent in September 2025, down from 5.1 per cent in August.

So still rising compared to a year ago, but not as fast anymore.

Month to month, however, those prices fell by 0.2 per cent – the first time they’ve done so since May 2024.

The ONS list the below as offering small changes to contribute to that figure:

• vegetables
• milk, cheese and eggs (particularly cheese)
• bread and cereals
• fish
• mineral waters, soft drinks, and juices

Karl Matchett22 October 2025 07:36

Transport the big outlier to keeping inflation up

The below chart from the Office for National Statistics shows a 0.15 percentage points increase in transport costs between August and September.

That’s down to air fares and fuel, the ONS explain, along with a lesser amount toward transport maintenance costs.

Transport costs overall rose by 3.8 per cent across the 12 months to September 2025.

ONS data on CPI (ONS)

Karl Matchett22 October 2025 07:28

Will Bank of England cut interest rates after inflation holds?

The government and Bank of England need to do more to “kickstart the economy”, says Totally Money CEO Alastair Douglas.

No rise in inflation will be seen as a minor win for Rachel Reeves and co, but the two questions now are whether three straight months without going up are enough for the MPC to cut interest rates, and how that in turn might impact how much taxes must be raised by Reeves.

“While inflation has slowed considerably since the October 2022 peak, it’s still been stubbornly difficult to shake off, consistently driving up the cost of living, squeezing household finances, and piling pressure onto the lives of millions,” Douglas said.

“At the same time, the Bank of England has been slow to cut rates, making things more difficult for homeowners.

“And as if it was a co-ordinated, both the Chancellor and the Governor of the Bank of England have blamed Brexit over the past few days – just weeks ahead of the Autumn Budget, and the next Monetary Policy Committee meeting. Now they’ve found a common enemy, let’s hope they can agree on a plan to kickstart the economy.”

Karl Matchett22 October 2025 07:21

Food costs fall for first time since May 2024

Commenting on today’s inflation figures for September, ONS Chief Economist Grant Fitzner said:

“A variety of price movements meant inflation was unchanged overall in September.

“The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year.

“These were offset by lower prices for a range of recreational and cultural purchases including live events. The cost of food and non-alcoholic drinks also fell for the first time since May last year.

“Meanwhile, the annual rise in the cost of goods leaving factories continued to increase, driven by higher food prices.”

Karl Matchett22 October 2025 07:08

Inflation rate holds at 3.8%

That’s a slight surprise – the inflation figure is confirmed at 3.8 per cent for September, the same level as during August.

That will be seen as a positive for the government after fears it would rise once more.

Karl Matchett22 October 2025 07:05

Inflation data doesn’t account for essentials, says baby firm CEO

Ahead of the inflation data now about to emerge, the CEO of Vital Baby says the omission of certain essentials like baby bottle feeders from the basket of items which make up the calculations makes it further from the truth than reality.

“Young families are generally among the hardest hit financially when prices go up, so to not include baby bottles and other feeding essentials in the nation’s inflation tracker seems out of touch.”

Some of those items are up far more than 4% or so, he says.

Karl Matchett22 October 2025 06:59

Inflation impacting on government and families alike

Inflation then, before we get the numbers.

For you, it affects the cost of your everyday bills: groceries through food inflation which has been high this year, other costs which are contracted to rise in line with inflation annually.

It’s also the indirect cause of other things you pay – like your mortgages – as when inflation is higher, so too are interest rates typically.

The government’s current struggles are similar.

“Inflation has insidiously woven its tentacles deep into the Treasury’s coffers, ratcheting up interest on the huge debt pile that’s mushroomed since 2020, inflating the cost of benefits and creating an economic backdrop where pay rises were inevitable. The chancellor will likely also have to contend with an expected downgrade to productivity forecasts from the OBR – a measure that had previously been pinpointed as a palatable solution to a decades-long problem,” said Danni Hewson, AJ Bell head of financial analysis.

“Questions remain over how to stimulate growth, make consumers feel confident enough to spend their cash and convince businesses that now is the time to take their foot off the brakes and invest. There are green shoots, with the economy resilient if uninspiring despite external factors like tariffs and geopolitical tensions, but many of the changes already implemented or under consideration are admirably long term.”

Karl Matchett22 October 2025 06:50

Rachel Reeves axes ‘arbitrary rules’ costing firms £6 billion ahead of Budget

Rachel Reeves has said plans to scrap paperwork and “arbitrary rules” for thousands of UK businesses would save firms almost £6 billion a year by the time of the next election.

She set out a package of measures aimed at boosting lacklustre economic growth at the Regional Investment Summit in Birmingham on Tuesday.

The gathering of business leaders and investors came after more gloomy news emerged for the Chancellor as Government borrowing in September hit the highest level for the month in five years.

The data from the Office for National Statistics (ONS) piles more pressure on Ms Reeves ahead of the November 26 Budget, in which she will have to fill a black hole estimated at around £50 billion by some economists.

Karl Matchett22 October 2025 06:40

Britain’s borrowing is back at pandemic levels – but there are reasons to be cheerful

The biggest gap between government spending and tax revenues in five years will come as another blow to the chancellor – but next month’s Budget is an opportunity for her to win back bond market confidence and, in turn, to lower borrowing costs, writes James Moore.

Karl Matchett22 October 2025 06:30

Peak inflation means ‘damage already done’ for some families

Tamsin Powell, consumer finance expert at Creditspring, said it might prove a positive for the mid-term – but still a tough situation to deal with in the here and now.

“If the Institute for Fiscal Studies’ forecast proves correct and inflation peaks in September, it will offer some hope that price rises may finally begin to ease. But for many UK households the damage has already been done. Living costs remain high, and families are still feeling the squeeze from months of rising prices across transport, food, and other essentials,” she said.

“For many families, even small increases in prices can deepen financial strain. Wages are still struggling to keep up with the cost of living, and without a savings buffer, a single bill or unexpected cost can cause real stress.

“As we move into winter, rising energy costs and Christmas spending will only add to the pressure. Many households will now be focusing on cutting back and reprioritising essentials, with day-to-day spending decisions becoming more about necessity than choice. Financial resilience is being tested, and small changes – like planning ahead, managing budgets closely, and seeking out support early – will be key to getting through the coming months.”

Karl Matchett22 October 2025 06:20