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Inflation remains at 3.8% - impact on pound and markets

ended 17. September 2025

The Consumer Prices Index (CPI) rose by 3.8% in the 12 months to August 2025, unchanged from July, according to official data published this morning. On a monthly basis, CPI rose by 0.3% in August 2025, the same rate as in August 2024. Air fares made the largest downward contribution to the monthly change in both CPIH and CPI annual rates; restaurants and hotels, and motor fuels made large, partially offsetting, upward contributions. 

  • What impact will this have on the Pound?
  • What impact will this have on markets (gilt yields, the FTSE, etc) more generally?
  • What impact will this have on tomorrow’s rate decision and the future course of rates?

Any other thoughts, send them across ASAP as this story is BREAKING.

3 responses from the Newspage community

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Editor
Scott Gallacher
Director at Rowley Turton
UK inflation remains stubbornly at 3.8%, still well above the Bank of England’s 2% target, but the lack of further increase offers some respite for the Chancellor. The Bank is likely to hold rates tomorrow, with little short-term impact on markets or gilt yields from today’s figures. Borrowers will be disappointed to see no immediate rate cuts, but can take some comfort that further rises also look unlikely. It’s good news for savers that rates remain high, although inflation is still eroding the real value of their returns.
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Patricia McGirr
Founder at Repossession Rescue Network
Inflation stuck at 3.8% is bad news for anyone hoping for quick relief. Sterling is going nowhere, so imports and holidays stay pricey. Gilts may ease a touch but lenders still face high funding costs, keeping mortgage rates sticky. Savers could see the best fixes slip lower, so now is the time to lock in. The Bank of England will almost certainly hold rates tomorrow. For households, food, fuel and services remain expensive. For businesses, borrowing costs are still biting. The reality is simple. Inflation is not rising but it is not falling fast enough, and that leaves consumers running just to stand still.
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Harry Mills
Director at Oku Markets
The UK inflation rate was unchanged at 3.8% in August, holding at the highest level since January 2024 and in line with market expectations.

- Housing and utilities were steady at 7.4%
- Inflation for hotels and restaurants accelerated
- Services inflation dipped to 4.7% after a spike to 5% in July

Underlying inflation showed tentative signs of easing, with airfares dropping after a previous spike, but food inflation remains high at 5.1%, which is a concern for broader consumer inflation expectations.

The pace of annual price rises has been steadily increasing since Labour's first Budget, and is expected to peak at 4% in Q4 per BoE forecasts.

This morning's inflation print won't capture many headlines, and that's probably a good thing for PM Starmer, the Chancellor, the BoE, and for us punters. But, it's unlikely to affect the BoE's decision tomorrow, with Bank Rate expected to remain at 4.00%.