LONDON (AP) — Inflation in the U.K. has fallen to its lowest level for more than three years, official figures showed Wednesday, a drop that has cemented market expectations that the Bank of England will lower interest rates at its next policy meeting in November.
The Office for National Statistics said consumer prices rose 1.7% in September, down from 2.2% the previous month, largely as a result of lower air fares and petrol prices. But price pressures were lower across the board, even in the services sector, which has worried policymakers as it accounts for around 80% of the British economy.
The decline was bigger than the 1.9% analysts had anticipated, and means that inflation is below the central bank's target rate of 2% for the first time since 2021.
As a result, the bank's rate-setting panel is expected to further reduce its main interest rate when it meets again in early November to 4.75% from 5%. It previously cut borrowing costs in August, the first reduction since the early days of the coronavirus pandemic in early 2020.
“A quarter-point rate cut in November is now effectively a done deal, and this report certainly makes the path to a consecutive cut in December much clearer,” said Luke Bartholomew, deputy chief economist at abrdn, formerly Aberdeen Asset Management.
Central banks around the world dramatically increased borrowing costs from near zero during the coronavirus pandemic when prices started to shoot up, first as a result of supply chain issues built up and then because of Russia’s full-scale invasion of Ukraine which pushed up energy costs.
With higher interest rates helping to reduce inflation from multi-year highs by making it more expensive for businesses and consumers to borrow, they have started cutting interest rates. The U.S. Federal Reserve, for example, slashed its main rate last month, while the European Central Bank, which sets monetary policy for the 20 countries that use the euro, is expected to cut again on Thursday.
The bank is widely expected to reduce borrowing costs again at its next meeting in November, especially as it will have details of the government’s budget on Oct. 30.
The new Labour government has said that it needs to plug a 22 billion pound ($29 billion) hole in the public finances and has indicated that it may have to raise taxes and lower spending, which would likely weigh on the near-term outlook for the British economy and put downward pressure on inflation.
The lower inflation rate in September is a boon for Treasury chief Rachel Reeves as she prepares to deliver her first budget, since many annual benefits from the government are linked to September's rate. The prospect of lower borrowing rates in the months ahead is also welcome as it will reduce the government's debt-related interest payments and potentially give her more leeway.
However, it's bad timing for many of the most vulnerable households in the U.K., since benefits are based on the inflation rate measured in September. Were they linked to the October rate, when inflation is widely expected to rise as a result of an increase in domestic energy bills, they would have got more.
“This temporary fall is badly timed for millions of low-to-middle income families as it will result in a lower increase in their benefits next year,” said Lalitha Try, economist at the Resolution Foundation.
FILE -A woman with an umbrella stands in front of the Bank of England, at the financial district in London, , Nov. 3, 2022. (AP Photo/Kin Cheung, File)
Israeli jets struck Beirut's southern suburbs early Wednesday for the first time in six days, Lebanese state media reported. Israel says it is striking Hezbollah assets in the suburbs, where the militant group has a strong presence, but is also a busy residential and commercial area. The casualty count was not yet clear.
Hezbollah acting leader Sheikh Naim Kassem declared Tuesday that the Lebanese militant group will ramp up attacks on Israel in response to an Israeli airstrike Monday on an apartment building in northern Lebanon that killed at least 22 people. Israel said it struck a target belonging to Hezbollah, but the United Nations called Tuesday for an independent investigation.
Israel has escalated its campaign against Hezbollah in recent weeks, after a year of near-daily exchanges of cross-border fire.
It’s been more than a year since Hamas-led militants blew holes in Israel’s security fence and stormed in, killing some 1,200 people, mostly civilians, and abducting another 250. Israel’s offensive in Gaza has killed over 42,000 Palestinians, according to local health authorities, who do not distinguish combatants from civilians. The war has destroyed large areas of Gaza and displaced about 90% of its population of 2.3 million people.
In northern Gaza, Israel has been waging an air and ground campaign in Jabaliya for more than a week, leaving families trapped in their shelters.
United States President Joe Biden’s administration warned Israel that it must increase the amount of humanitarian aid it allows into Gaza within the next 30 days or risk losing access to American weapons funding.
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PARIS — French President Emmanuel Macron stressed “the absolute necessity of a ceasefire without further delay in Lebanon” and called for Israel “cease” operations in the country in a phone call with Israeli Prime Minister Benjamin Netanyahu on Tuesday.
Macron also expressed “indignation” after Israel fired on and wounded several U.N. peacekeepers in southern Lebanon, according to a statement from Macron’s office. He urged Israel “to put an end to this unjustifiable targeting.”
France will continue to work with troop contributors and alongside the U.N. Secretary-General to ensure the full implementation of the mission of the peacekeeping force known as UNIFIL, the statement said.
TEHRAN, Iran — Iran is ready for a retaliatory attack from Israel, the Foreign Ministry said Wednesday.
In a phone call Tuesday with United Nations Secretary-General António Guterres, Iran’s Foreign Minister Abbas Araghchi said his country is fully prepared to answer to any kind of “adventure-seeking.”
“Responsibility of consequences of spreading insecurity in the region will be on the regime and the United States as main supporter,” of Israel, he added.
He urged the U.N. to use its entire capacity for stopping “crimes and invasions,” as well as providing humanitarian aid to Lebanon and Gaza.
Iran launched some 180 missiles at Israel on Oct. 1 in retaliation for the deaths of Hamas Leader Ismail Haniyeh and Hezbollah leader Hassan Nasrallah. Israel has threatened to strike back for the barrage.
Iran is the main backer of Lebanese Hezbollah and supports anti-Israeli groups in the region such as Palestinian Hamas.
BEIRUT — Israeli jets struck the southern suburbs of Beirut early Wednesday for the first time in six days, Lebanese state media reported. The casualty count was not yet clear.
The attack comes just one day after caretaker Prime Minister Najib Mikati said the United States government gave him some assurances of Israel easing its strikes in the Lebanese capital.
Israel says it is striking Hezbollah assets in the suburbs, where the militant group has a strong presence, but is also a busy residential and commercial area. The Israeli military said the Wednesday strike hit a weapons warehouse stored under a residential building.
The Israeli military posted an evacuation warning on X, formerly Twitter, saying it is targeting a building in the Haret Hreik neighborhood. An Associated Press photographer who witnessed the strikes said there were three in the area. The first strike was documented less than an hour after the notice.
Hezbollah began firing rockets into Israel on Oct. 8 in solidarity with the Palestinian militant group Hamas, following their surprise attack on southern Israel. Almost one year of low-level fighting has turned into all-out war and displaced some 1.2 million people in Lebanon.
Elsewhere, Israeli strikes late Tuesday in the southern town of Qana killed at least 15 people, according to Lebanese Civil Defense.
MANILA, Philippines — A European Union official expressed regret over the failure so far of efforts to forge a cease-fire in the Middle East, saying that fighting between Israel and the Hezbollah has made it more difficult to work for wide-ranging reforms in Lebanon and create conditions to draw international financial aid in.
EU Commissioner for Crisis Management Janez Lenarčič told The Associated Press in an interview late Tuesday in Manila that stalled reforms in Lebanon include the election of a new president, the establishment of a working government and the signing of a deal with the International Monetary Fund.
“It’s difficult to see that happening in these circumstances when Lebanon is under such a strain,” said Lenarčič, who flew to Manila to attend an Asia Pacific conference on disaster mitigation.
“That’s one of the reasons why we’re calling for a cease-fire, so as to allow Lebanon to organize itself so that it can benefit from all the funding which is out there,” he said. “I regret that we have not been heard.”
The EU was also extremely concerned over the killings of civilians in the fighting between Israel and the Hezbollah militant group. “This collateral damage is simply unacceptable,” Lenarčič said.
Zavik Zoigi checks the Sukkah, a temporary hut built for the Jewish holiday of Sukkot, placed in front of his residence ahead the weeklong holiday celebrations in Kiryat Shmona, a town located neart to the border with Lebanon, in northern Israel, Tuesday, Oct. 15, 2024. (AP Photo/Leo Correa)
Lebanese Red Cross volunteers remove the remains of killed people from the rubble of a destroyed building at the site of Monday's Israeli airstrike in Aito village, north Lebanon, Tuesday, Oct. 15, 2024. (AP Photo/Hussein Malla)
People attend the funeral ceremony of the late Iranian Revolutionary Guard Gen. Abbas Nilforushan, who was killed in an Israeli airstrike in Beirut in late September, in Tehran, Iran, Tuesday, Oct. 15, 2024. (AP Photo/Vahid Salemi)
Lebanese army soldiers stand on the rubble of a destroyed building at the site of Monday's Israeli airstrike in the village of Aito, north Lebanon, Tuesday, Oct. 15, 2024. (AP Photo/Hussein Malla)
Palestinian activist Khairi Hanoun holds up a poster of Hassan Nasrallah, the leader of Hezbollah who was killed by an Israeli strike in September, while mourning Rayan al-Sayed, a Palestinian killed in an Israeli raid Monday in the West Bank city of Jenin, during Al-Sayed's funeral, Tuesday, Oct. 15, 2024. (AP Photo/Majdi Mohammed)
Smoke rise from Israeli airstrikes on Dahiyeh, Beirut's southern suburbs, Lebanon, Wednesday, Oct. 16, 2024. (AP Photo/Hussein Malla)
Smoke rise from Israeli airstrikes on Dahiyeh, Beirut's southern suburbs, Lebanon, Wednesday, Oct. 16, 2024. (AP Photo/Hussein Malla)
Smoke rise from Israeli airstrikes on Dahiyeh, Beirut's southern suburbs, Lebanon, Wednesday, Oct. 16, 2024. (AP Photo/Hussein Malla)
