LONDON – British inflation held steady in August, in line with analysts’ expectations, data from the Office for National Statistics showed on Wednesday.
The overall consumer price index (CPI) was consistent with July’s 2.2% reading and in line with forecasts in a Reuters poll of economists. The overall CPI in May and June was 2%, consistent with the Bank of England’s target interest rate.
Services inflation, which rose to 5.6% in August from 5.2% in July, is closely watched by the Bank of England as it dominates the UK economy and reflects rising domestic prices.
Core inflation, which excludes energy, food, alcohol and tobacco, was 3.6%, up from 3.3% in July.
The Office for National Statistics said rising airfares were the biggest factor contributing to upward pressure on prices, which came off a low base last year. Meanwhile, motor fuels, hotels and restaurants saw the largest declines.
Bank of England policymakers will meet on Thursday to announce the latest monetary policy decision, with traders generally expecting the bank to keep interest rates stable.
However, bets on a second consecutive quarter-point rate cut doubled this week to nearly 40%, with the Fed likely to cut borrowing costs more significantly when it meets on Wednesday.
The reading also comes ahead of the UK’s upcoming Autumn Statement on October 30, where the new Labor government will set out its budget plans for the new term.
Treasury Department Principal Secretary Darren Jones said he welcomed “more controllable inflation” but noted that much work still needs to be done to “repair the fundamentals of the economy.”
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