IoD press release Inflation fall sets stage for rate cut next month
Commenting on today’s data from the Office for National Statistics, that showed the annual rate of CPI inflation falling to 1.7% in September 2024, Anna Leach, Chief Economist at the Institute of Directors, said:
“Today’s decline in inflation follows hot on the heels of yesterday’s softer labour market data, and helps smooth the path to the next rate cut. Private sector regular wage growth is now below 5%, vacancies are close to pre-pandemic levels and PAYE data suggests employment is weakening – all of which point toward diminishing inflationary pressure. But, there is still inflationary pressure out there. Inflation is set to rise next month as the 10% rise in the Ofgem price cap comes into effect, oil prices are volatile, public sector pay settlements will contribute to stickiness in wage growth and the Bank will need to assess the inflationary impact of the Budget. How these different factors play out will ultimately define the pace of interest rate cuts.
“This Budget has a lot of boxes to tick. With inflation back at target, the public finances need to be stabilised without undermining investment and employment incentives. And business and market confidence must be secured to underpin the investment needed to lift the economy and public finances. It is vital that short-term pressure to plug the deficit does not lead to decisions that conflict with the urgent need to grow the economy. The business tax roadmap will be a useful communication tool as well as an important part of the plan to deliver clarity and stability for business.”