UK inflation rate: what is inflation, as food prices fall and September CPI rate in UK stays steady - news
Households could soon feel a little relief as supermarket prices cool 📉
- UK inflation held steady at 3.8% in September, defying forecasts of a rise to 4%
- Falling food prices helped offset higher petrol and airfare costs, keeping the rate flat
- The steadiness suggests the cost of living crisis may be easing, though prices remain high
- Shoppers could see slower price rises, while mortgage rates may start to stabilise next year
- The figure also means benefits will rise by 3.8% next April, and pensions by 4.8% under the triple lock
Inflation stayed at 3.8% in September, defying economists’ expectations of a rise, and bringing a small sigh of relief for households still feeling the pinch from years of high prices.
According to the Office for National Statistics (ONS), the cost of living held steady as easing food prices helped to offset higher petrol costs.
It’s the third month in a row that the Consumer Prices Index (CPI) has remained unchanged, suggesting the UK’s long inflation battle may finally be stabilising.
But while the news hints at some progress, it doesn’t mean things will suddenly feel cheaper, and what happens next could have mixed consequences for shoppers, homeowners and renters alike.
What is inflation?
Inflation measures how much prices rise over time; essentially, how much more expensive your weekly shop, bills or petrol become compared with a year ago.
A 3.8% inflation rate means that something costing £100 last year now costs £103.80 on average.
When inflation is too high, it erodes the value of money, and your income doesn’t stretch as far. When it’s too low, it can signal a weak economy. The Bank of England aims for around 2%, a level seen as steady and sustainable.
What’s behind the steady inflation rate?
The ONS said the biggest upward pressures came from petrol and airfares, which didn’t fall as much as this time last year.
On the other hand, prices for food, drink, and cultural activities, like concerts and events, dipped slightly, helping to keep inflation flat overall.
In fact, food and non-alcoholic drink prices fell by 0.2% in September, the first monthly drop since May 2023, driven by supermarket discounts and increased competition.
Still, prices remain 4.5% higher than a year ago, showing that the cost of groceries is easing, but not back to “normal” yet.
What it means for your money
For shoppers
While inflation holding steady sounds like good news, it doesn’t mean prices are falling across the board. It simply means that prices, on average, are rising more slowly than before.
Many items, especially essentials like meat, bread and dairy, are still more expensive than last year.
Retailers’ ongoing price cuts suggest supermarket inflation could continue to cool in the coming months, especially as energy and transport costs stabilise.
But don’t expect a rapid return to pre-pandemic price levels, it’s more likely that prices will level off rather than drop significantly.
For homeowners and mortgage holders
A steady inflation rate strengthens the case for the Bank of England to hold interest rates where they are, or even consider cutting them early next year. The Bank’s current goal is to bring inflation back to 2%, and this latest data shows it’s on the right path.
If the Bank pauses rate rises, mortgage rates could gradually start to ease, giving some breathing space to homeowners coming off fixed deals.
But any reductions are expected to be slow, so borrowers should still brace for relatively high repayments for a while longer.
For renters
Renters are unlikely to see immediate relief. While inflation steadiness can eventually help cool housing costs, rent prices are still climbing faster than overall inflation in many areas, driven by high demand and limited supply.
If interest rates stop rising, landlords with mortgages may feel less pressure to hike rents further, but that effect will take time to filter through.
How will it affect benefits and pensions?
Because September’s inflation figure is used to set benefit increases for next year, most state payments, including Universal Credit and disability benefits are expected to rise by 3.8% in April 2026.
That’s lower than many had expected but still represents a modest boost for households.
Meanwhile, pensioners can expect a larger rise. Under the “triple lock,” pensions increase by the highest of inflation, earnings growth, or 2.5%. With earnings growth at 4.8%, that’s the figure that will likely apply from April 2026.
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