Annual inflation in the UK remained unchanged at 2.2% in August, defying forecasts of a slight rise to 2.3%, according to official figures released ahead of the Bank of England’s interest rate decision.
Despite the stability in headline consumer prices, core inflation—which excludes volatile elements like food and energy—accelerated from 3.3% to 3.6%, exceeding economists’ expectations of 3.5%.
The Office for National Statistics (ONS) highlighted that rising airfares, which jumped by 11.9% year-on-year, were the primary driver of inflation in August. Meanwhile, a decline in fuel prices by 3.4% helped keep overall inflation steady. Prices in restaurants and hotels rose at the lowest rate in three years, increasing by 4.4%.
The figures come ahead of Thursday’s meeting of the Bank of England’s Monetary Policy Committee (MPC), where policymakers are expected to maintain the base interest rate at 5%. The Bank, which targets an inflation rate of 2%, made its first interest rate cut in four years this summer and is expected to make gradual cuts moving forward. Markets anticipate one more reduction in 2024, bringing the base rate down to 4.75%.
While overall inflation has stabilised, the rise in core and services inflation—from 5.2% to 5.6%—could concern more hawkish members of the MPC. Goods prices, on the other hand, fell by 0.9% over the year, remaining in deflationary territory.
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