UK inflation accelerates as August consumer prices rise 3.1%
Britain's consumer price growth picks up in August, adding to pressure on policymakers as the Bank of England prepares its latest rate decision. The increase takes annual inflation above the central bank's July forecast and reflects a renewed rise in energy prices linked to conflict in the Gulf.
Highlights
- UK consumer price inflation rose to 3.1% in August from 2.9% in July, topping economists' forecasts.
- August inflation exceeded the Bank of England's July projection of 2.8% for the month, driven by rising energy prices after Gulf conflict resumed.
- The higher-than-forecast inflation is expected to maintain market focus on UK price pressures, despite expectations for no change in interest rates.
August inflation tops central bank forecast
As reported by Reuters, official figures released on Wednesday show British inflation rises to 3.1% in August from 2.9% in July, one day before the Bank of England is expected to keep interest rates on hold.Economists polled by Reuters had largely expected consumer price inflation to accelerate to an annual rate of 3.1%. The move is tied to a renewed climb in energy prices following the resumption of conflict in the Gulf.
Implications for Bank of England policy
The August reading comes in above the Bank of England's July projection, when it predicted annual inflation would stand at 2.8% for the month.The higher-than-forecast inflation figure is likely to keep attention on the UK's price outlook even as markets expect the central bank to leave borrowing costs unchanged.
Our earlier coverage of the UK’s softening labour market and wage growth showed payrolls and vacancies falling over the summer while private-sector pay remained relatively subdued. We noted that this mix of easing wage pressures and rising energy costs was shaping expectations for the Bank of England’s next moves, keeping markets focused on whether rates might stay on hold or tighten later in the year.
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