Scottish economic bulletin: October 2025

Inflation

The inflation rate was unchanged at 3.8% in August.

• Inflation remained stable in August at 3.8%, unchanged from July.^[3] There were notable increases in the inflation rate for restaurants and hotels (3.8%, up from 3.4%) and food and drink (5.1%, up from 4.9%) which were offset by a fall in the inflation rate for transport (2.4%, down from 3.2%), partly due to a fall in air fares over the year (-3.5%).
• More broadly, services price inflation remains elevated relative to goods price inflation, though has remained relatively stable since the start of the year while good price inflation has been on an upward trend.
• Latest data show service price inflation dipped slightly in August to 4.7% (down from 5.0%) while goods price inflation rose to 2.8% - it’s highest rate since October 2023.

• Inflation remains above the Bank of England’s 2% target rate, although it is broadly in line with the Bank’s August forecast for inflation to rise temporarily to 4% in September before gradually falling across 2026 and returning to target in 2027.
• There are risks in both directions to this inflation outlook, reflecting subdued growth in the economy, elevated trade and geopolitical uncertainty in the global economy and the current persistence of domestic inflationary pressures in the services sector and in wage growth. The Bank’s Monetary Policy Committee (MPC) held the Bank Rate unchanged in September at 4%, continuing its gradual approach to monetary loosening.^[4]