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UK inflation holds steady at 2.7% in September

Tahmina Mannan
Written By:
Tahmina Mannan

The official rate of UK inflation remained steady at 2.7% in September, despite a fall in food, petrol and diesel prices.

The Office of National Statistics (ONS) said that the rise in air fares offset the fall in petrol and diesel prices. 

The UK inflation is measured by the consumer price index (CPI). The retail price index (RPI) measure of inflation fell slightly from 3.3% to 3.2% in August.

The Bank of England is targeting CPI inflation of 2%, but will not raise interest rates to control inflation due to the UK unemployment rate.

The Bank will review the current interest rate of 0.5% once unemployment rate falls to 7%. The current unemployment rate is 7.7%.

However, the Bank has said it could choose to raise rates if it thinks inflation will still be above 2.5% in 18 months to two years’ time.

The ONS numbers showed that food inflation stood at around 4.8%.

The price of fruit and vegetables rose slightly, but there was a drop in the price of other foods including bread and cereals, fish, jam and chocolate.

Despite the rate of inflation remaining unchanged from August, the current rate still leaves UK households collectively needing to find an extra £17.7bn a year to maintain their standard of living enjoyed 12 months ago, according to retirement income specialist MGM Advantage.

Each household will typically need to spend an extra £679 a year to maintain their standard of living from a year ago.

Aston Goodey from MGM Advantage said: “Inflation is the elephant in the room, with many households continually battling with the weekly bills to makes ends meet. Although there was some good news today, with petrol and diesel prices lower, the main contributors to longer term inflation have been food, fuel, housing and utility bills. These higher bills are hitting people hard.

“The issue is especially acute for retirees, who are being hit hard by low interest rates and high living costs. There is no simple answer, but with annuity rates still away off the levels seen even three or four years ago, customers are seeking out alternatives to conventional solutions which can help make their pensions go further while and importantly hedge against inflation.

“The figures today also set the basic state pension from April 2014. Pensioners will see an increase of £2.95 a week on the basic state pension of £110.15. This will clearly not cover the rise in the cost of living felt by retirees, many of whom are already struggling, highlighting the importance of ensuring any other pension income considers inflation during retirement.”