Despite inflation not falling to or below 2%, it may still be good news for future interest rate reductions.  There remains hope that the current stability of inflation leaves the door open for at least one more 0.25% reduction in interest rates before the end of this year.

Why is inflation not falling further?

Service price pressure is the key reason for inflation not falling further than expected.  Services inflation rose to 5.6% from 5.2%.  Airfares rose 22% from July to August.  Noted as the 2nd most significant rise on record.  Although this is no real concern, it's always been a fairly volatile market.

Core inflation, a measure without the volatility of food and energy costs, was 3.6%, up from 3.3%.  

Annual earning growth without considering bonus payments fell to 5.1% from 5.4%.

The economy overall is struggling.  Output began to stagnate in June and that has remained so since.

Interest rates

Analysts predict more interest rate cuts as we enter the Winter, and they may come faster than we have seen so far.