UK Inflation Unchanged At 3.8%

(RTTNews) - U.K. consumer price inflation remained sticky in August on higher food prices, official data showed Wednesday, ahead of the policy announcement by the Bank of England on Thursday.

The consumer price index rose 3.8 percent on a yearly basis in August, the same rate of increase as seen in July, the Office for National Statistics reported. Inflation matched economists' expectations and stood well above the target of 2 percent.

The 3.8 percent inflation was the joint-highest recorded since January 2024, when the rate was 4.0 percent.

Core inflation that excludes prices of energy, food, alcohol and tobacco eased more than expected to 3.6 percent from 3.8 percent in July. The core rate was seen at 3.7 percent.

The U.K. central bank is widely expected to keep the bank rate on hold at 4.00 percent on Thursday after lowering it by a quarter point in August.

At the August meeting, the BoE had projected inflation to peak at 4 percent in September and signaled that the monetary easing cycle is nearing an end as policymakers became more concerned about persistent inflation.

The Confederation of British Industry Principal Economist Martin Sartorius said the Monetary Policy Committee faces a delicate balance between signs of a cooling labor market and the risk of price pressures remaining stubbornly high.

"It's rate decision in November will likely hinge on whether future data give the MPC confidence that a further cut will not contribute to inflation staying elevated for longer," Sartorius said.

British Chambers of Commerce Research Manager Stuart Morrison said the rise in national insurance, continued strong wage growth and higher tariffs are all eroding operating margins of firms.

"There is also growing concern that sticky inflation will limit the scope for further interest rate cuts," Morrison added. Data today showed that airfares made the largest downward contribution to annual inflation, while increases in restaurants and hotels, and motor fuels partially offset the decreases.

Food and non-alcoholic beverages prices climbed 5.1 percent from a year ago in August, which was the strongest growth since January 2024.

The increase in goods cost rose slightly to 2.8 percent from 2.7 percent, while services inflation eased to 4.7 percent from 5.0 percent. The CPI moved up 0.3 percent month-on-month in August, following a 0.1 percent rise in July.

Another data from the ONS showed that annual growth in UK house prices decelerated to 2.8 percent in July from 3.6 percent in June.