UK inflation remained stable in August, with a monthly acceleration expected. Despite this, the Bank of England is expected to keep rates unchanged at its next meeting.
In the UK, headline inflation remained stable in August year-on-year at 2.2%, in line with forecasts.
Monthly inflation accelerated to 0.3% in August after a 0.2% decline in July, also in line with expectations. Economists had anticipated a 2.2% rise in consumer prices, similar to the previous month.
In detail, inflation excluding volatile items reached +3.6% over one year and +0.4% over one month, against +3.3% and +0.1% in July. The consensus predicted +3.5% and +0.4% respectively.
Policy rates expected to remain unchanged
The figures come as the Bank of England (BoE) meets today and is expected to keep interest rates unchanged, having cut them on August 1. The BoE, which had forecast inflation of 2.4% in August, now believes it could reach around 2.75% by the end of the year.
Meanwhile, sterling strengthened against the dollar after the release of inflation data. Investors also reduced their expectations for a BoE rate cut on Thursday, putting the probability at around 28%.
According to the Office for National Statistics, the 22.2% rise in air fares between July and August contributed significantly to the rise in service inflation. Although ticket prices usually rise at this time, the ONS said this was the second largest increase since records began in 2001.
Meanwhile, services inflation, a key indicator of domestic inflationary pressures, accelerated to 5.6% in August, from 5.2% in July. Forecasts had called for a more modest increase to 5.5%.
Jihen Mkehli
Published on 09/18/24 11:19
