International

UK inflation forecast for September signals cautious Bank of England stance

Wednesday, 22 October 2025 4:04AM UTC

Upcoming September CPI data expected to show a rise to 4.0%, the strongest inflation reading since early 2024, influencing the Bank of England's monetary policy decisions amid ongoing economic uncertainties.

The United Kingdom is poised to release its Consumer Price Index (CPI) figures for September 2025, a crucial data point that markets and policymakers are watching closely for signals on inflationary pressures. According to forecasts from the Office for National Statistics (ONS), headline CPI inflation is expected to rise to 4.0% year-on-year, up from 3.8% in August. This anticipated increase represents the strongest inflation reading since January 2024 and remains double the Bank of England's (BoE) 2% target for price stability.

Core CPI, which excludes volatile food and energy prices and is closely monitored by the BoE, is also projected to edge higher to 3.7% annually, from the previous month’s 3.6%. On a monthly basis, both headline and core CPI are expected to grow by 0.2%, continuing the trend of modest increases observed over recent months. Alongside CPI, the Retail Prices Index (RPI) is forecasted to tick up slightly to 4.7% year-on-year. These inflation figures will be the last major data before the BoE’s Monetary Policy Committee (MPC) convenes on November 6 to decide on interest rates.

The significance of these inflation numbers lies in their influence on the BoE’s monetary policy stance. A CPI reading at or above 4% would strengthen expectations that the BoE may hold its rates steady or even consider tightening, rather than reopening the door to cuts. The BoE’s Chief Economist, Huw Pill, has underscored the persistence of inflationary pressures, signalling a need to "recognise CPI stubbornness as more pressing” and suggesting a cautious pace for easing monetary restrictions.

Pill’s stance aligns with recent speeches where he emphasized the importance of maintaining price stability amid high economic uncertainty. At a University of Birmingham event, Pill advocated a conservative approach to interest rates, prioritising inflation control over growth or employment, which monetary policy influences only limitedly in the long term. He stressed the need for simple and credible commitments to aggressive anti-inflation measures to keep inflation expectations anchored, especially given the volatility caused by geopolitical risks and unreliable data.

That complex environment is echoed in the BoE’s projections and recent policy decisions. The MPC last held rates at 4% in September amidst subdued economic activity and a cooling labour market, although employment growth remains positive and inflation is expected to peak at 4% in September before gradually declining toward the 2% target by mid-2027. Labour market data reveal an unemployment rate steady at 4.8%, with net employment continuing to grow, indicating some resilience in the economy despite global trade uncertainties.

However, the Committee is mindful of the risks of keeping rates elevated too long. Deputy Governor Sarah Breeden has cautioned that prolonged high rates could dampen output and employment, ultimately suppressing inflation below target. She also suggested that recent inflation rises might be temporary, even as she and other policymakers remain watchful for signs of persistent inflationary pressures, especially in pricing behaviour amongst businesses.

The broader inflation context includes structural challenges such as labour market tightness, Brexit-related disruptions, changes in immigration policies, and increased business taxes. These factors contribute to inflationary dynamics that the BoE must carefully manage. The OECD has revised UK inflation forecasts upwards, projecting 3.5% in 2025 and 2.7% in 2026, reinforcing the view of a prolonged adjustment period before inflation normalises.

Market reaction to the upcoming inflation data is expected to be significant for the Pound Sterling and the GBP/USD exchange rate. Analysts note that the British currency has recently faced resistance near 1.3470 and may correct downward towards 1.3335 if inflation undershoots expectations. On the other hand, a confirmed 4% CPI reading could bolster the Pound by tempering expectations of rate cuts.

In sum, the UK’s September CPI report is poised to be a critical guidepost for the Bank of England as it navigates a delicate balance between fighting entrenched inflation and supporting economic growth. The data will likely reinforce the central bank’s commitment to a prudent and evidence-based approach to monetary policy in the months ahead.

📌 Reference Map:

Paragraph 1 – ^[1] (FXStreet), ^[6] (Reuters)
Paragraph 2 – ^[1] (FXStreet), ^[7] (MoneyWeek)
Paragraph 3 – ^[1] (FXStreet), ^[4] (Reuters)
Paragraph 4 – ^[2] (Reuters)
Paragraph 5 – ^[5] (Bank of England), ^[6] (Reuters)
Paragraph 6 – ^[3] (Reuters)
Paragraph 7 – ^[4] (Reuters), ^[5] (Bank of England), ^[6] (Reuters)
Paragraph 8 – ^[1] (FXStreet), ^[7] (MoneyWeek)

Source: Noah Wire Services

More on this

https://www.fxstreet.com/news/uk-cpi-expected-to-rise-in-september-supporting-boes-hawkish-stance-202510220215 - Please view link - unable to able to access data
https://www.reuters.com/world/uk/bank-englands-pill-reaffirms-commitment-inflation-targeting-2025-10-08/ - Bank of England Chief Economist Huw Pill emphasized the need for a 'conservative' approach to interest rate setting in a speech at the University of Birmingham. He argued for prioritizing price stability over broader economic goals like growth and employment, over which monetary policy holds limited long-term influence. Although not directly commenting on current policy, Pill indicated that central bankers must remain firm if inflation escalates. He noted that high economic uncertainty, due to geopolitical risks and unreliable data, undermines intricate modeling of rate decisions. Pill advocated for simple, robust principles—'eternal verities'—over complex economic optimizations. He also stressed that a credible commitment to aggressive measures against inflation could help suppress it preemptively. The Bank of England recently projected that the UK’s consumer price inflation stood at 4% in September and will not return to the 2% target until mid-2027.
https://www.reuters.com/world/uk/keeping-interest-rates-high-too-long-is-risky-boes-breeden-says-2025-09-30/ - Bank of England Deputy Governor Sarah Breeden warned that maintaining high interest rates for too long poses risks to the UK economy, including reduced output and employment, which could ultimately pull inflation below the target. Speaking at Cardiff Business School, she countered concerns raised by fellow policymaker Catherine Mann about persistent inflation, stating that the recent rise in inflation is likely temporary and not indicative of long-term inflationary pressure. Breeden was among the majority of the Monetary Policy Committee (MPC) members who chose to hold interest rates at 4% in September, after a narrow vote in August to reduce rates. Though the BoE anticipates inflation to peak at 4% in September 2025 and decline gradually to 2% by 2027, concerns remain over sluggish economic growth. Breeden emphasized monitoring business pricing behavior, noting some signs of continued pricing power. Meanwhile, Deputy Governor Clare Lombardelli and policymaker Megan Greene expressed caution about inflation shock assumptions and the pace of rate cuts, though Governor Andrew Bailey reaffirmed rates would eventually fall.
https://www.reuters.com/world/uk/boe-hawk-pill-says-he-is-more-comfortable-inflation-risk-2025-09-23/ - Bank of England Chief Economist Huw Pill stated he is now more comfortable with the inflation outlook in the UK than he was earlier this year, reflecting changing market conditions and risks. Although previously vocal about inflation threats, Pill acknowledged a shift in risk balance and supported the decision to hold the BoE’s interest rate at 4%. However, he had previously dissented against rate cuts in May and August. UK inflation stood at 3.8% in August—highest among G7 nations—and is expected to peak at 4% in September, far above the BoE’s 2% target, which is not projected to be met until spring 2027. Contributing to inflation pressures are structural issues such as labor market sluggishness post-COVID, Brexit, immigration policy changes, and recent business tax increases. The OECD also raised the UK’s 2025 inflation forecast to 3.5% and 2026 to 2.7%. Pill also expressed dissent against slowing the reduction of the BoE’s government bond holdings from its quantitative easing program, arguing that the central bank has adequate tools to manage market risks and should proceed more assertively in shrinking its balance sheet.
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2025/september-2025 - The Bank of England's Monetary Policy Committee (MPC) maintained the Bank Rate at 4% in September 2025. The MPC noted that the UK economy was experiencing subdued activity, with firms' demand for labour and hiring intentions softening further. The unemployment rate remained unchanged in the three months to July. Pay growth continued to ease but remained above levels explained by economic fundamentals. Twelve-month Consumer Price Index (CPI) inflation was 3.8% in August, in line with expectations. The MPC projected that CPI inflation would peak at 4.0% in September, reflecting near-term upward pressure from food and services prices, which was expected to be offset during the fourth quarter by a slight decline in projected core goods and energy inflation.
https://www.reuters.com/sustainability/sustainable-finance-reporting/uk-inflation-holds-38-august-ons-says-2025-09-17/ - In August 2025, the UK's annual consumer price inflation remained steady at 3.8%, aligning with forecasts by Reuters and the Bank of England (BoE). This rate is notably higher than inflation in the U.S. (2.9%) and the euro zone (2.1%). The BoE is expected to maintain interest rates at 4% in its upcoming meeting, following a 25bps cut in August, amid concerns over continued above-target inflation. Although wage growth has decelerated, basic pay still increased by 4.8%, maintaining pressure on inflation. The BoE projects inflation to rise to 4% in September and remain above its 2% target until spring 2027. Meanwhile, the UK economy grew only 0.2% in the three months to July, suggesting a sluggish start to the second half of the year. Consumer concerns about inflation persist, as longer-term inflation expectations rose to their highest levels since 2019.
https://moneyweek.com/economy/inflation/inflation-forecast-where-are-prices-heading-next - As of August 2025, UK inflation remains at 3.8%, driven by rising food, fuel, and hospitality costs, though offset by falling airfare and cultural expenses. The Bank of England forecasts inflation will peak at 4% in September, the highest since January 2024, before declining. Expectations are for inflation to average 3.75% in late 2025, drop to 2.7% by Q3 2026, and return to the 2% target by mid-2027. Other forecasts, including Deutsche Bank's and those collected by the Treasury, see a similar downward trend, with estimates around 3.6% for Q4 2025 and 2.3% for Q4 2026. Persistent inflation is complicating decisions about interest rate cuts. The Bank of England held the base rate at 4% in September 2025 amid concerns about entrenched inflation expectations and wage pressures. While Deutsche Bank anticipates a December 2025 rate cut with more reductions in 2026, other analysts, like Oxford Economics, suggest no cuts before early 2026. The Bank's stance remains 'gradual and careful,' contingent on evidence showing easing inflation pressures, especially in wages and services.

Noah Fact Check Pro

The draft above was created using the information available at the time the story first emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed below. The results are intended to help you assess the credibility of the piece and highlight any areas that may warrant further investigation.

Freshness check

Score: 8

Notes: The narrative is based on a press release from FXStreet, dated October 22, 2025, discussing the anticipated UK Consumer Price Index (CPI) figures for September 2025. This suggests a high freshness score. However, similar forecasts have been reported by other reputable sources, such as Reuters and MoneyWeek, indicating that the content may be recycled across multiple outlets. The earliest known publication date of substantially similar content is October 15, 2025, from MoneyWeek. This indicates that the narrative has appeared more than 7 days earlier, which may affect its originality. Additionally, the narrative includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged.

Quotes check

Score: 9

Notes: The narrative includes direct quotes from Bank of England's Chief Economist, Huw Pill, regarding the persistence of inflationary pressures and the need for a cautious approach to monetary policy. These quotes are consistent with statements made by Huw Pill in recent months, as reported by Reuters and other reputable sources. The earliest known usage of these quotes is from September 23, 2025, in a Reuters article. This suggests that the quotes are not original to this narrative and have been used in earlier material.

Source reliability

Score: 7

Notes: The narrative originates from FXStreet, a financial news website that aggregates content from various sources. While FXStreet is known for providing timely financial news, it often republishes content from other outlets, which can affect the originality of the information. The narrative also references statements from the Bank of England's Chief Economist, Huw Pill, which are consistent with his recent public statements. However, the reliance on aggregated content and the use of previously published quotes may raise questions about the source's reliability.

Plausability check

Score: 8

Notes: The narrative discusses the anticipated rise in the UK's Consumer Price Index (CPI) for September 2025, aligning with forecasts from reputable sources such as the Bank of England and the Office for Budget Responsibility. The inclusion of direct quotes from Huw Pill adds credibility to the narrative. However, the use of recycled content and previously published quotes may affect the overall plausibility of the narrative.

Overall assessment

Verdict (FAIL, OPEN, PASS): FAIL

Confidence (LOW, MEDIUM, HIGH): MEDIUM

Summary: The narrative is based on a press release from FXStreet, dated October 22, 2025, discussing the anticipated UK Consumer Price Index (CPI) figures for September 2025. Similar forecasts have been reported by other reputable sources, such as Reuters and MoneyWeek, indicating that the content may be recycled across multiple outlets. The earliest known publication date of substantially similar content is October 15, 2025, from MoneyWeek, suggesting that the narrative has appeared more than 7 days earlier. Additionally, the narrative includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged. The inclusion of direct quotes from Huw Pill adds credibility, but the reliance on aggregated content and the use of previously published quotes may raise questions about the source's reliability. Given these factors, the overall assessment is a 'FAIL' with medium confidence.

UK Economy
Inflation
Bank of England