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Inflation predicted to hit 4% in "blow to borrowers": "Welcome to 1970s style stagflation"

ended 20. October 2025

INFLATION is predicted to hit 4% in September in a “blow to borrowers” with experts warning: "Welcome to 1970s style stagflation".

It is expected to be double the Bank of England's (BoE) target of 2% in official data due to be published on Wednesday.

S&P Global said April's tax hikes have been a key contributor to the rise from 3.8%.

It will be a blow to Chancellor Rachel Reeves ahead of her Autumn Budget next month.

Experts warned that borrowers would be hit – with a BoE rate cut likely off the cards.

Omer Mehmet, Managing Director at Welling-based Trinity Finance, said it would ensure there will be no BoE rate cuts for the time being.

He added: "If inflation creeps back up to 4%, this will show exactly how fragile the recovery really is. It will be a blow to borrowers in particular as higher inflation means further Bank of England rate cuts will be kicked into the long grass for the time being. 

"Tax hikes and stubborn core costs are squeezing households and small businesses just when confidence was starting to return. The government can talk about stability, but if inflation stays this high, rate cuts are effectively off the table — and that means higher borrowing costs for longer. 

“For mortgage holders, it’s another reminder that fiscal policy and monetary policy are now pulling in opposite directions, and ordinary families are caught in the middle.”

Antonia Medlicott, Founder & MD at London-based Investing Insiders, urged savers to shop around for the best deals.

She said: "If inflation hit 4% in September, then the Bank of England is more likely to delay previously anticipated cuts to avoid fuelling further inflation. A hold on the base rate probably means savers won't be suffering from any knock-on effects to the interest they're receiving - and that's no doubt a relief to those who were expecting cuts. 

"But, high inflation still gives them a headache because it now means their money has to work even harder to keep up. Those keeping cash in accounts paying less than 4% need to face the fact their money is losing purchase power. And if that happens, it's time to shop around. 

“Even in these circumstances, there are still good rates to be had. Be prepared to look at the digital banks though as that's often where you'll find the top offers and rates.”

Riz Malik, Director at Southend-on-Sea-based R3 Wealth, sounded the alarm.

He continued: "Welcome to 1970s style stagflation. Even with rising unemployment, high inflation will be the issue that stops deep rate cuts from the Bank of England’s Monetary Policy Committee. 

“It seems regardless of who inhabits Downing Street, this country’s economic woes continues and prospects look as bleak as a mid winter.”

Scott Gallacher, Director at Leicester-based Rowley Turton, said the UK is in trouble.

He added: "UK Plc is in a shocking state – high inflation, no growth, and rising unemployment. It’s a toxic mix that doesn’t bode well for the future or our children. My eldest has just finished his degree and, among his peers, many are carrying on to obtain Masters or Phds, in part because of the poor jobs market, while others are struggling to find graduate positions. 

"I see this as an employer, as for almost every role we advertise, we’re inundated with applications, often from people with master’s degrees – a clear sign of how weak the jobs market is. 

"With inflation still high, a rate cut looks unlikely. Borrowers will continue to feel the squeeze, while savers may benefit a little longer. But the longer high rates persist, the more strain we’ll see on households, small businesses, and growth."

Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning Ltd, said savers may benefit from the figures.

He continued: "Britain risks getting stuck in a high-tax, low-growth trap as inflation bites again. If inflation does rise to 4%, it reinforces the sense that UK plc is stuck in a high-tax, low-growth loop. 

"The government’s fiscal tightening and frozen thresholds have squeezed disposable income, while wage growth is losing momentum. That’s not a recipe for sustainable confidence. 

“Until inflation starts easing decisively, the Bank of England will struggle to justify cutting rates meaning higher borrowing costs will linger longer for households and businesses. Savers may benefit marginally, but for mortgage holders and small firms, the pressure is far from over.”

Samuel Mather-Holgate, Independent Financial Adviser at Swindon-based Mather and Murray Financial, hit out at Chancellor Rachel Reeves.

He said: "If Rachel Reeves' goal was to kill off the UK economy she would have passed with flying colours. At a time when British business needs an injection of capital through tax cuts to stimulate the stagnation in the veins of UK companies, she's likely to fill the needle with a poison. 

“More tax cuts will kill off the slight prospect of any growth and this is what we should expect from an incompetent chancellor.”

Anita Wright, Chartered Financial Planner at Ribble Wealth Management, added: “Inflation – standing at twice the target – would not be alarming if it were paired with convincing, near-term growth. It is not. Labour has talked a good game on ‘growth’, yet recent measures are anti-growth, squeezing disposable incomes and, by extension, the 60% of GDP driven by consumer spending. 

"If households feel poorer, they spend less; if they spend less, businesses invest less; and if investment slows, productivity stalls. In principle, Bank of England should not cut rates while inflation remains sticky. In practice, with public balance sheets heavily indebted, a prolonged downturn risks doing more damage than a period of above-target inflation. 

"The likely path is earlier-than-ideal rate cuts, tolerating negative real yields as a deliberate way to ease debt burdens – an old playbook last used to good effect after the Second World War. As for the health of ‘UK Plc’, resilience is not the same as dynamism. Policy must shift from revenue-raising to productivity-raising.”

7 responses from the Newspage community

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Omer Mehmet
Managing Director at Trinity Finance
If inflations creeps back up to 4%, this will show exactly how fragile the recovery really is. It will be a blow to borrowers in particular as higher inflation means further Bank of England rate cuts will be kicked into the long grass for the time being. Tax hikes and stubborn core costs are squeezing households and small businesses just when confidence was starting to return. The government can talk about stability, but if inflation stays this high, rate cuts are effectively off the table — and that means higher borrowing costs for longer. For mortgage holders, it’s another reminder that fiscal policy and monetary policy are now pulling in opposite directions, and ordinary families are caught in the middle.
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Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
Welcome to 1970s style stagflation. Even with rising unemployment, high inflation will be the issue that stops deep rate cuts from the Bank of England’s Monetary Policy Committee. It seems regardless of who inhabits Downing Street, this country’s economic woos continues and prospects look as bleak as a mid winter.
Copy

Editor
Scott Gallacher
Director at Rowley Turton
UK Plc is in a shocking state — high inflation, no growth, and rising unemployment. It’s a toxic mix that doesn’t bode well for the future or our children. My eldest has just finished his degree and, among his peers, many are carrying on to obtain Masters or Phds, in part because of the poor jobs market, while others are struggling to find graduate positions. I see this as an employer, as for almost every role we advertise, we’re inundated with applications, often from people with master’s degrees — a clear sign of how weak the jobs market is.

With inflation still high, a rate cut looks unlikely. Borrowers will continue to feel the squeeze, while savers may benefit a little longer. But the longer high rates persist, the more strain we’ll see on households, small businesses, and growth
Copy

Editor
Eamonn Prendergast
Chartered Financial Adviser at Palantir Financial Planning Ltd
Britain risks getting stuck in a high-tax, low-growth trap as inflation bites again. If inflation does rise to 4%, it reinforces the sense that UK plc is stuck in a high-tax, low-growth loop. The government’s fiscal tightening and frozen thresholds have squeezed disposable income, while wage growth is losing momentum. That’s not a recipe for sustainable confidence. Until inflation starts easing decisively, the Bank of England will struggle to justify cutting rates meaning higher borrowing costs will linger longer for households and businesses. Savers may benefit marginally, but for mortgage holders and small firms, the pressure is far from over.
Copy

Editor
Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
If Rachel Reeves' goal was to kill of the UK economy she would have passed with flying colours. At a time when British business needs an injection of capital through tax cuts to stimulate the stagnation in the veins of UK companies, she's likely to fill the needle with a poison. More tax cuts will kill of the slight prospect of any growth and this is what we should expect from an incompetant chancellor.
Copy

Editor
Anita Wright
Chartered Financial Planner at Ribble Wealth Management
Inflation—twice target—would not be alarming if it were paired with convincing, near-term growth. It is not. Labour has talked a good game on “growth”, yet recent measures are anti-growth, squeezing disposable incomes and, by extension, the 60% of GDP driven by consumer spending. If households feel poorer, they spend less; if they spend less, businesses invest less; and if investment slows, productivity stalls. In principle, Bank of England should not cut rates while inflation remains sticky. In practice, with public balance sheets heavily indebted, a prolonged downturn risks doing more damage than a period of above-target inflation. The likely path, is likely to be earlier-than-ideal rate cuts, tolerating negative real yields as a deliberate way to ease debt burdens—an old playbook last used to good effect after the Second World War. As for the health of “UK Plc”, resilience is not the same as dynamism. Policy must shift from revenue-raising to productivity-raising.
Copy

Editor
Antonia Medlicott
Founder & MD at Investing Insiders
If inflation hit 4% in September, then the Bank of England is more likely to delay previously anticipated cuts to avoid fuelling further inflation. A hold on the base rate probably means savers won't be suffering from any knock-on effects to the interest they're receiving - and that's no doubt a relief to those who were expecting cuts.

But, high inflation still gives them a headache because it now means their money has to work even harder to keep up. Those keeping cash in accounts paying less than 4% need to face the fact their money is losing purchase power. And if that happens, it's time to shop around. Even in these circumstances, there are still good rates to be had. Be prepared to look at the digital banks though as that's often where you'll find the top offers and rates.