The UK’s annual inflation rate rose by 2.2% in August, matching the increase in July, as lower petrol prices at the pump were offset by higher air fares.
Figures from the Office for National Statistics (ONS) show the government’s preferred measure of the cost of living remained steady, matching forecasts by City economists and hovering just above the Bank of England’s 2% target.
Consumers have seen inflation ease from above 10% in early 2023, mainly because of lower increases in the cost of energy and food.
The rise in the consumer prices index was below the Bank’s forecast for a rise of almost 2.4%.
The Bank is under pressure to cut interest rates to boost growth but officials are expected to hold interest rates when they meet on Thursday.
Petrol prices have fallen in response to concerns that the global economy is slowing down and demand from major consumers such as China will be weaker in the coming months.
The ONS said consumers restricted spending on big-ticket items such as furniture, and hotels also dropped their prices, limiting the increase in inflation. However, a rise in air fares, especially to European destinations, kept the CPI above the Bank’s target as services sector inflation jumped to 5.6% in August from 5.2% in July.
Illustrating the pressure on household budgets over the last three years, the ONS said that, while inflation had moderated in the past year, gas prices in August were 68% higher than they were in March 2021, while electricity prices were 45% higher.
Darren Jones, the chief secretary to the Treasury, said: “Years of sky-high inflation have taken their toll; and prices are still much higher than four years ago. So, while more manageable inflation is welcome, we know that millions of families across Britain are struggling, which is why we are determined to fix the foundations of our economy so we can rebuild Britain and make every part of the country better off.”
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Jeremy Hunt, the shadow chancellor, said: “Labour inherited inflation at the Bank of England’s target and today’s figures show they must do the hard work to keep inflation down, as we did in government.
“That includes rejecting potentially damaging new employment rights which will put up the cost of labour and ultimately raise prices as a result.”