LONDON – British inflation held steady in August, in line with analysts’ expectations, data from the Office for National Statistics showed on Wednesday.
The overall consumer price index (CPI) remained unchanged from the previous year July reading 2.2% It was also in line with forecasts from a Reuters poll of economists. The overall CPI in 2018 was 2% possible and Junein line with the Bank of England’s target interest rate.
Services inflation, which rose to 5.6% in August from 5.2% in July, is closely watched by the Bank of England as it dominates the UK economy and reflects rising domestic prices.
Core inflation, which excludes energy, food, alcohol and tobacco, was 3.6%, up from 3.3% in July.
The Office for National Statistics said rising airfares were the biggest factor contributing to upward pressure on prices, which came off a low base last year. Meanwhile, motor fuels, hotels and restaurants saw the largest declines.
Bank of England policymakers will meet on Thursday to announce the latest monetary policy decision, with traders generally expecting the bank to keep interest rates stable.
Bets on a second consecutive quarter-point rate cut doubled to nearly 40% earlier this week as the Fed lowered borrowing costs more sharply, but fell back to 40% after the news. 28%.
Richard Carter, head of fixed-rate research at investment management firm Quilter Cheviot, said the new data raised the possibility of the central bank taking a more cautious approach.
Carter said in the report: “Although recent data show that UK economic output has stagnated and wage growth has slowed, core inflation remains sticky, with service sector inflation rising from 5.2% to 5.6%, which will seriously affect the Bank of England’s decision-making. .
“This complicates the central bank’s ability to justify further easing in the short term, especially compared with the Fed’s more aggressive stance. The BoE’s quarter-point rate cut in August was the first in more than four years For the first time, it may be some time before we have another cut,” he added.
That view was echoed by Ruth Gregory, deputy UK chief economist at Capital Economics, who said rising inflation in services could be particularly worrying for the central bank. She added that it is expected that prices may face further upward pressure in the coming months due to rising utility prices.
“Overall, a pause in rate cuts is expected tomorrow, and today’s release reinforces this view. We continue to assume the next 25 basis point cut will come in November, with additional cuts at the other BoE meetings ahead of June ,” said Gregory.
The reading also comes ahead of the UK’s upcoming Autumn Statement on October 30, where the new Labor government will set out its budget plans for the new term.
Treasury Department Principal Secretary Darren Jones said he welcomed “more controllable inflation” but noted that much work still needs to be done to “strengthen the economic fundamentals.”
