Friday, November 22, 2024

UK Inflation Holds Steady At 2.2% – Business Eye

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UK inflation held steady at 2.2% in the year to August, despite a seasonal jump in the cost of air fares.

The air fares rise was effectively offset by lower fuel prices and prices in restaurants increasing more slowly, the Office for National Statistics (ONS) said.

The latest figure means overall inflation remains slightly above the Bank of England’s target of 2%.

But the rate is significantly lower than at the peak of the cost of living crisis in 2022.

The latest figures come as the Bank of England is expected to keep interest rates unchanged at 5% when it meets on Thursday.

Most economists think a cut is likely at the next meeting in November.

Grant Fitzner, chief economist at the ONS, said inflation “held steady” in August as price falls in some areas compensated for rises in others.

“The main movements came from air fares, in particular to European destinations, which showed a large monthly rise, following a fall this time last year,” he added.

“This was offset by lower prices at the pump as well as falling costs at restaurants and hotels. Also, the prices of shop bought alcohol fell slightly this month, but rose at the same time last year.” Raw material prices also fell last month, driven by lower crude oil prices.

Martin Sartorius, Principal Economist of the CBI, welcomed the news.

“Inflation has fallen short of the Bank of England’s latest forecast expectations for the second month in a row. This will be welcomed by households and businesses, although they will still be feeling the pinch from three years of elevated costs growth. 

“While the Bank’s Monetary Policy Committee will be reassured by today’s data, they’re likely to remain wary of loosening policy too quickly. Inflation is expected to pick up later this year and domestic price pressures, such as wage growth, still pose an upside risk to the outlook. That should result in a gradual path for interest rate cuts going forward, with rates likely to stay unchanged this month.”    

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