UK inflation remained broadly unchanged in the year to August 2025, driven by rising food and energy prices but dampened by core inflation and services.
The consumer prices index (CPI) stayed at 3.8% in the 12 months to August, matching the figure for July. CPI including owner-occupiers’ housing costs (CPIH) fell slightly to 4.1% in August, down from 4.2% in July.
Meanwhile, the retail prices index (RPI), the inflation measure favoured by trade unions in pay negotiations, also stood still. It was 4.8% in the year to August, the same figure as the month before.
Inflation August 2025
Jobs market continuing to stagnate, says official data
The cost-of-living data released by the Office for National Statistics today follows yesterday’s labour market figures, which showed that the annual growth in regular weekly earnings (excluding bonuses) for the period May-July 2025 had fallen to 4.8% (level with RPI), down from 5.0% in the previous rolling quarter.
Food prices, which have a greater relative impact on people on low incomes, increased to 5.1%, the fifth consecutive month they have risen.
This has likely been caused by retailers passing on rising employment costs following April’s increase in employers’ national insurance contributions, although poor harvests are also having an impact, according to the British Retail Consortium.
Air fares made the largest downward contribution to the monthly change in both CPIH and CPI rates, while restaurants and hotels, and motor fuels made the largest upward contributions, according to the ONS.
The UK is increasingly becoming an outlier internationally, with CPI inflation at 3.8%, compared to France’s 0.8%, Germany’s 2.1% (both August 2025), and 2.4% in the EU27 (July).
James Smith, research director at the Resolution Foundation think tank, said: “Several months of disappointing data has highlighted the UK’s unwanted position as an international outlier for ‘sticky’ inflation, with the highest headline inflation of any G7 economy.
“This headline rate held steady last month, at an uncomfortably high 3.8 per cent, but there were encouraging signs under the bonnet as both core and services inflation fell. Sticky inflation is still a problem however, with food prices rising by over 5%.”
Chancellor Rachel Reeves said the government wants to “put more money in people’s pockets while we work to build a stronger, more stable economy”.
She added: “I know families are finding it tough and that for many the economy feels stuck. That’s why I’m determined to bring costs down and support people who are facing higher bills.”
Shadow chancellor Sir Mel Stride said: “This morning’s news that inflation remains well above target is deeply worrying for families. This is the eleventh consecutive month inflation has exceeded the 2% target. Labour’s decision to tax jobs and ramp up borrowing is pushing up costs and stoking inflation – making everyday essentials more expensive.”
The Bank of England’s monetary policy committee meets tomorrow to decide whether or not to reduce interest rates.
TUC general secretary Paul Nowak said: “Global challenges mean food costs keep rising. Higher inflation is also being driven by water and energy bills rising. Keeping interest rates high will not bring down these prices – but instead, rates are adding to the pain for families and businesses.
“The Bank of England should cut interest rates tomorrow to ease pressures on households and businesses. This will help to boost growth and make life more affordable for everyone.”
Martin Sartorius, principal economist at the CBI, said: “Inflation remained elevated in August, consistent with the Bank of England’s projections. Higher food and energy prices, alongside the pass-through from increased labour costs, are expected to keep price growth firm in the near term.
“The monetary policy committee looks set to keep interest rates unchanged tomorrow and, going forward, the MPC faces a delicate balance between signs of a cooling labour market and the risk of price pressures remaining stubbornly high. Its 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.”
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