UK inflation matched market expectations in August, holding steady at 2.2% annually, according to official data.
This figure remains below the Bank of England’s forecast of 2.4% and unchanged from July’s 2.2%.
Despite hitting the BoE’s 2% target earlier this year, inflation has since struggled to return to those levels.
As BoE Governor Andrew Bailey acknowledged, “We are not yet back to target on a sustained basis.”
Services inflation, a key concern, rose to 5.6%, below the Bank’s 5.8% projection but still signalling continued price pressures.
Core inflation, which excludes energy, food, alcohol and tobacco, rose to 3.6%, slightly above market expectations of 3.5% and up from 3.3% in July.
Monthly inflation also increased by 0.3%, as anticipated, following a 0.2% decline the previous month.
Commenting on the figures, Danni Hewson, AJ Bell head of financial analysis, said: “Surging demand for a couple of weeks in the sun enabled airlines to lift their fares this summer.
“Since the pandemic, people have prioritised making memories with family over other expenses. Even though prices have jumped, savvy consumers have found ways to fund their holidays, with many plumping for all-inclusive deals that have helped them budget.
“The uptick in airfares has offset falling inflation elsewhere this summer, holding the UK CPI number at 2.2%, a smidgeon over the Bank of England’s target but one that is likely to result in some caution among central bankers later this week.”
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Jonny Black, chief commercial and strategy officer at abrdn adviser, said: “The Bank of England will be pleased that last month’s inflation uptick has met a quick end.
“That being said, Andrew Bailey himself has warned that considering this ‘job done’ might be premature. These are still volatile conditions.
“Advisers have a key role to play in helping clients reflect on the experience of the past few years and stressing why inflation mitigation strategies are so important in their planning, and to reassure them that their plans have these in place.”
Daniel Casali, chief investment strategist at Evelyn Partners, said: “Although the core measure surprised on the upside in August, the broad downward trend in lower UK CPI inflation is intact, allowing the Bank of England (BoE) to cut interest rates over the coming months.
“However, given that services CPI inflation remains elevated at 5.6% year-over-year and economic growth has picked-up in the first half of 2024, the BoE will probably take a cautious approach in loosening unless there is significant belt tightening coming after the budget on 30 October that dampens growth expectations.”
Richard Carter, head of fixed interest research at Quilter Cheviot, added: “The inflation data, which follows July’s rate of 2.2%, will unlikely cause the BoE to want to diverge from its current plans, especially given core inflation rose by 3.6% in the 12 months to August, up from 3.3% in July.
“However, the US Federal Reserve, which is expected to deliver a potentially larger-than-anticipated rate cut this week, may play a part in fuelling speculation about the speed of further monetary easing across the world.
“While the US central bank is likely to cut rates by 0.25 or even 0.50 percentage points after its policy meeting on Wednesday, the Bank of England is more likely to take a cautious approach, especially after today’s data.”
Last month, UK inflation rose for the first time since December 2023.
As time goes by, I become ever more sceptical of the government’s published figures on things such as inflation. I’m still seeing supermarket prices go up by plenty more than 2.2%.
I was recently considering buying a new component (an import from Canada) for my hi-fi system,, and was somewhat shocked to discover that its UK distributors have has recently hiked its RRP by 25%!