U.K.'s Inflation Data Keeps Door Open for Another Bank of England Rate Cut in 2025, Says Deutsche Bank

07:05 AM EDT, 10/22/2025 (MT Newswires) -- Wednesday's United Kingdom inflation data keeps the door open at the Bank of England for another rate cut this year, said Sanjay Raja, Deutsche Bank's chief U.K. economist.

Headline consumer price index came in nearly 0.2 percentage point below the BoE's MPC's projection at 3.78% year over year, noted the bank. More importantly, core and services CPI both missed to the downside too, with the latter printing at 4.69% year over year while the BoE had 5%.

"Crucially," all of the BoE's preferred core services measures slipped in September, highlighting a more broad-based fall in price momentum, stated Raja. Indeed, theater ticket prices, live music events, travel fares all contributed to the downside in service prices.

On the goods side, it was a combination of weaker furniture, car and IT prices that saw price momentum stay relatively muted. And in some good news for the MPC, food prices also came in softer -- something the BoE has acknowledged as more salient for households. Both processed and meat prices surprised to the downside, relative to Deutsche Bank's projections.

The odds of a Q4 2025 rate cut have risen on the back of Wednesday's data, added Raja. With two additional CPI prints to watch, and two further labor market reports to come before the December meeting, Deutsche Bank thinks there will be enough ammunition for the MPC to ease rates further.

With Finance Minister Rachel Reeves laying the groundwork for lowering the cost of living in the upcoming November Budget, the bank continues to think that a December rate cut is very much in play.

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