Could inflation have peaked?
Inflation is at it’s highest rate since the start of 2024. Here, we explain everything you need to know about the latest inflation stats and which savings accounts offer inflation-beating rates.
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What is the current rate of inflation in the UK?
The current CPI rate of inflation in the UK is 3.8% for September 2025, according to the latest figures from the Office for National Statistics (ONS). That’s the same as it was in both of the last two months. The good news is it’s lower than expected – it was predicted to go up to 4%.
The current rate of core inflation (which removes more volatile products like food and fuel) in the UK is 3.5%, down from 3.6% last month. Services inflation (which has remained higher than the rest for a while now) stayed at 4.7% .
Meanwhile, RPI (still used in some cases such as rail fares, interest on student loans and air passenger duty) in the UK fell to 4.5% from 4.6%.
Historic inflation rates
The graph below shows how CPI inflation has changed in the UK.
source: tradingeconomics.com
What is inflation?
The main thing to remember is even if the rate of inflation is falling, prices are still going up. They’re just increasing by a slower rate.
Check out our What are inflation and deflation? article to learn more about what price changes count towards inflation, as well as explanations of the different measures including CPI and RPI.
When is the next inflation announcement?
The next inflation announcement will be on 19 November 2025.
The ONS publishes inflation figures each month and has confirmed the following dates for upcoming announcements :
- 19 November 2025
- 17 December 2025
- 21 January 2026
What’s changed this month?
Food price increases have slowed for the first time in six months – sitting at 4.5% for September, compared to 5.1% in August. Of course, that does still mean they’re getting more expensive!
Elsewhere gig tickets slowed from 8.6% to 5.8% but transport costs were up 3.8% from 2.4% last month.
You can see how prices have changed for individual items in this ONS calculator, while this chart shows the annual CPI rates over 12 months for the last three months.
| August 2025 | September 2025 | |
|---|---|---|
| CPI All items | 3.8 | 3.8 |
| Food and non-alcoholic beverages | 5.1 | 4.5 |
| Alcohol and tobacco | 5.9 | 5.8 |
| Clothing and footwear | 0.2 | 0.5 |
| Housing and household services | 7.4 | 7.3 |
| Furniture and household goods | 0.8 | 0.4 |
| Health | 3.4 | 3.5 |
| Transport | 2.4 | 3.8 |
| Communication | 6.1 | 4.7 |
| Recreation and culture | 3.2 | 2.7 |
| Education | 7.5 | 7.2 |
| Restaurants and hotels | 3.8 | 3.9 |
| Miscellaneous goods and services | 2.3 | 2.0 |
| All goods | 2.8 | 2.9 |
| All services | 4.7 | 4.7 |
| CPI exc food, energy, alcohol and tobacco (core CPI) | 3.6 | 3.5 |
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Will inflation go up or down?
In July the Bank of England predicted a peak of a 4% rate in September (higher than their May forecast of a 3.7% peak). Even though this month is actually lower, it’s hoped it’s still the peak.
So we should start seeing the inflation rate fall, though it’ll probably be a gradual drop to the Bank of England’s 2% target, which could easily take more than a year to reach.
What does it mean for the base rate of interest?
In September, the Bank of England kept the base rate to 4%, and the chances of a cut in 2025 and the start of 2026 were seen a quite low. The fact that inflation may have peaked at a lower than expected rate means the markets are pricing in a cut next February rather than in March.
Of course, things keep changing, especially with the Budget set for 26 November, so there’s always a chance we’ll get a cut in November or December this year.
What does it mean for future price increases
This month’s inflation rate is linked to the state pension. When these go up they’ll be either the September rate of inflation, wage growth from May to July, or 2.5%, which ever is highest. Well, since the wage rate is 4.8%, that’s the figure that will most likely be used next April.
However it’s also used for other benefits so the 3.8% rate will be used to uplift these in April.
Here are the main price hikes linked to inflation rates:
- July RPI – rail fares in March
- September CPI – benefits including State Pension in April
- December CPI – student loans in September
Do any savings accounts beat inflation?
If possible, it’s always important to have interest rates higher than inflation – otherwise you’re losing money in real terms.
The bad news then is that savings rates have all been falling, especially on easy access where many providers pay less than 3.8%. That means there’s a larger risk that you’re getting less than inflation on your cash right now.
However there are still ways to get way above inflation.
The top-paying savings account is the Principality Building Society Regular Saver which offers 7.5%, though only for six months. It’s worth noting that this is a regular savings account. Other top regular savers pay a little less at 7.1% and 7% but they’re for 12 months.
You can also earn 6% with the Santander Edge Saver on up to £4,000, if you hold a Santander Edge account. If you add direct debits (to earn cashback) on the linked current account there’s a monthly fee for the current account, so keep that in mind when comparing savings rates.
However if you’re looking for accounts without these balance restriction, there are still a good number of easy access and fixed rate savings accounts above the inflation rate.
Hi Andy, great summary, very professional. I’m still learning about all of these subjects, so thanks for that!
Do you know what to expect regarding the interest rate of the savings accounts? Are the banks planning to reduce the interest rate soon based on the reduction in the UK inflation?
Government controlled ONS will produce low incorrect data for September in order to determine next years pension & benefit increases then “amend” the data by December so the government can claim that it is too late to correct next years increases.