Chancellor Rachel Reeves emphasized the need for government support to reduce inflation and boost economic growth, acknowledging the challenging environment.

Wage increases are generally outpacing inflation, which may help ease the cost-of-living squeeze for many, with benefits like universal credit expected to rise by around 6% next spring.

This inflation data is influencing the Bank of England's monetary policy considerations, with potential for earlier rate adjustments amid the economic slowdown.

The upcoming UK budget on November 26 will be significantly shaped by this inflation data, affecting welfare benefit adjustments and government spending.

The next interest rate decision is scheduled for November 6, amid uncertainties about potential rate cuts, especially with upcoming fiscal measures.

Discussions around measures such as cutting VAT on energy costs and the November 26 budget, which may include tax rises or targeted spending, could influence inflation trends and market sentiment.

Analysts suggest the inflation figures could either strengthen or weaken the pound depending on government policy responses, with market expectations closely tied to fiscal measures.

The UK's inflation rate remained steady at 3.8% in September 2025, defying economists' expectations of a rise to 4%, indicating a softer inflationary pressure.

Main drivers of inflation included petrol prices and airfares, which saw smaller decreases compared to the previous year, while prices for food, non-alcoholic drinks, and recreational activities fell.

The IMF forecasts the UK will have the highest inflation rate among G7 countries in 2025 and 2026, impacting the Bank of England's rate-cutting plans.

High inflation is particularly burdensome for low-income households, with rising living costs and stagnant wages causing financial strain for over half of low-paid workers.

Inflation in sectors like hospitality remains stubborn, with wages possibly rising by up to 10% due to higher minimum wages and taxes, sustaining inflationary pressures.