UK inflation remained at 3.8% in September, surprising markets that expected a rise to 4.0%. This points to easing price pressures, helped by lower costs for food, drinks and entertainment. While this is welcome news for consumers, it reflects a sluggish economy growing just 0.3% in the three months to August. The Bank of England still faces a challenge bringing inflation down to its 2% target without harming growth. As a result of the data, traders now see a 70% chance of an interest rate cut in December, up sharply from 40% before the figures were released. This shift in expectations led to a rally in government bonds, with the two-year gilt yield falling to 3.77% and the ten-year to 4.41%. The data strengthens the case for policy easing and marks a potential turning point in the UK's inflation cycle.