Inflation Drop Anticipated After Energy Price Spike

Bank of England’s Governor, Andrew Bailey, expressed optimism for a significant decrease in inflation by October, following last year’s sharp energy price increase. In an interview with the Belfast Telegraph on Friday, Bailey outlined that the central bank had projected a year-end inflation rate of 4.9%, but September witnessed a higher-than-expected inflation hold at 6.7%.

This figure, unmatched among major advanced economies, sparked speculation among investors about another potential interest rate hike. However, Bailey argued that these figures were in line with the central bank’s expectations and highlighted a minor decrease in core inflation.

Further, he emphasized the importance of a substantial reduction in wage inflation to bring the overall inflation closer to the bank’s two percent target. Despite the unexpected hold in September’s inflation, Bailey pointed to an encouraging reduction in core inflation to 6.1%. He attributed his prediction for October’s significant decrease in headline inflation to last year’s energy price spike no longer influencing the annual comparison.

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