Inflation stable at 2.2 per cent in August

British inflation was unchanged at 2.2 per cent in August, official data showed Wednesday, fuelling expectations that the Bank of England will not cut interest rates again at its meeting this week.

The Consumer Prices Index was at the same level as in July, the Office for National Statistics said.

The steady annual inflation rate cemented analyst expectations that the central bank would likely avoid cutting rates again at the end of its regular two-day policy meeting on Thursday.

The BoE trimmed borrowing costs in August for the first-time since the onset of the Covid pandemic in early 2020 and after UK inflation retreated from four-decade highs, briefly meeting its two-percent target in May before edging back up.

"Years of sky-high inflation have taken their toll; and prices are still much higher than four years ago," Darren Jones, a senior official at the UK Treasury, said in response to Wednesday's data.

The main inflationary movements in August came from large monthly rises to airfares, particularly for European destinations, noted Grant Fitzner, chief economist at the ONS.

"This was offset by lower prices at the pump as well as falling costs at restaurants and hotels," he added.

Core Inflation - which excludes volatile items like food and energy - came in at 3.6 per cent in the 12 months to August, up from the 3.3 per cent in July, signalling persistent price pressures.

Prices of alcohol and tobacco overall were little changed between July and August, compared with a rise of 1.5 per cent a year ago. On an annual basis, prices rose by 5.7 per cent in the year to August 2024, down from 7.2 per cent in the year to July, and the lowest annual rate since March 2023.

In the food and non-alcoholic beverages category, prices went up by 0.2 per cent between July and August, compared with a rise of 0.3 per cent a year ago. The annualised inflation stood at 1.3 per cent in August, as against 1.3 per cent in July.

Commenting on the figures, the British Independent Retailers Association (Bira) said the inflation rate holding steady in August provides some stability for the high street - but stressed that the Bank of England needs to now reduce interest rates to boost consumer spending.

“We're pleased to see inflation has remained static, although consumer spending on the high street for non-essential items remains depressed. With inflation not rising, we hope the Bank of England will reduce interest rates to boost consumer confidence,” Andrew Goodacre, Bira chief executive, said.

“Reducing interest rates is crucial to fully restoring consumer confidence and bringing people back to the high streets. We are approaching the golden quarter for retail, and we need to see consumer confidence and spend improve,” he added.

The Bank of England is expected to keep interest rates unchanged at 5 per cent when it meets on Thursday.