UK inflation is set to drop markedly for October amid continued efforts to tackle the higher cost of living, the governor of the Bank of England has said.
Andrew Bailey indicated inflation will return to its recent pattern of slowdowns after the Office for National Statistics (ONS) recorded a surprise pause last month, leaving inflation at 6.7 per cent in September.
The Bank of England previously forecast that Consumer Prices Index (CPI) inflation would hit 4.9 per cent by the end of the year.
Inflation is expected to fall significantly this month due to a comparison against sharp energy price increases seen over the same month last year.
Mr Bailey, on a visit to Northern Ireland, told the Belfast Telegraph that he expected this to drive a “noticeable drop” in the inflation rate.
He stressed that Wednesday’s higher-than-expected headline inflation rate had not set the central bank’s efforts to bring inflation down off course.
“It was not far off what we were expecting,” Mr Bailey said.
“Core inflation fell slightly from what we were expecting and that’s quite encouraging.”
The governor of the Bank however highlighted that wage inflation will need to come down significantly in order for inflation to come back towards the Bank’s 2 per cent target rate.
On Tuesday, the ONS reported that wages outpaced inflation for the first time in nearly two years with 7.8 per cent growth in the three months to August.
This means wages were 0.7 per cent higher once CPI inflation is taken into account.
On Friday, Mr Bailey said: “Pay growth as measured is still well above anything that’s consistent with the (inflation) target.
“I understand, though, that people will want to see the evidence that inflation is coming down. I think we can see that evidence.”
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