In the UK, inflation held steady at 3.8% in August, with food prices experiencing another increase. This matches the inflation rate reported in July. The Office for National Statistics (ONS) regularly publishes inflation data, noting a fifth consecutive month of food price acceleration, particularly affecting cheese, fish, and vegetables.
Food price inflation reached 5.1% in the year leading up to August, marking the highest level in 18 months. Concurrently, fuel prices rose, while hotel costs declined less than in the previous year. However, these increases were balanced by slower airfare hikes compared to the previous year. The latest inflation report precedes the Bank of England’s imminent announcement on interest rates, with expectations leaning towards a maintenance of the current 4% base rate due to persistent inflation, a weakened job market, and the upcoming Autumn Budget.
The Bank of England’s inflation target stands at 2%, with interest rates peaking at 5.25% before being reduced five times to the current 4% level. Grant Fitzner, ONS chief economist, noted that various price fluctuations offset each other in August, with airfare costs being the primary downward driver compared to the previous year, while fuel prices and hotel expenses exhibited contrasting trends. Food inflation continued to rise for the fifth straight month, with marginal increases observed in various food categories like vegetables, cheese, and fish.
Chancellor Rachel Reeves emphasized efforts to alleviate financial strains on families through initiatives like raising the National Living Wage and expanding benefits such as bus fare caps and free school meals. Shadow chancellor Sir Mel Stride expressed concern over prolonged high inflation levels, attributing them to policy decisions impacting cost-of-living pressures for households.