Inflation has held at 2.2% according to the latest figures from the Office for National Statistics (ONS).
The consumer prices index (CPI) stood at 2.2% in the year to August 2024, unchanged from July.
Meanwhile, CPI including owner-occupiers’ housing costs (CPIH) was recorded as 3.1% in the 12 months to August, also unchanged from the previous month.
The retail prices index (RPI), not an official statistic but the inflation rate used by trade unions in pay negotiations, stood at 3.5% in the year to August, down slightly on the 3.6% figure for July.
Inflation August 2024
The latest CPI figure means inflation remains slightly above the Bank of England’s target of 2%. Commentators suggest that it makes it likely the BoE will reduce interest rates when its monetary policy committee meets tomorrow.
Grant Fitzner, ONS chief economist, said inflation held “steady” in August as price falls in some areas compensated for rises in others.
“The main movements came from air fares, in particular to European destinations, which showed a large monthly rise, following a fall this time last year,” he said. “This was offset by lower prices at the pump as well as falling costs at restaurants and hotels. Also, the prices of shop bought alcohol fell slightly this month, but rose at the same time last year.”
Julian Jessop, economics fellow at the Institute of Economic Affairs, said: “Most of the pick up reflected a jump in air fares, which are volatile from year to year depending on the timing of school holidays. Services inflation is also still lower than anticipated in the Bank’s latest Monetary Policy Report. There is little sign of the ‘wage-price’ spiral that some on the MPC fear.
“Headline inflation may spike in the autumn due to the increase in domestic energy bills, but the Bank has already signalled that it will look past this temporary effect. The bigger picture is that the economy is slowing again, the labour market is cooling, and interest rates are higher than necessary to continue bearing down on inflation.”
Martin Sartorius, principal economist at the CBI, said: “Inflation has fallen short of the Bank of England’s latest forecast expectations for the second month in a row. This will be welcomed by households and businesses, although they will still be feeling the pinch from three years of elevated costs growth.
“While the Bank’s Monetary Policy Committee will be reassured by today’s data, they’re likely to remain wary of loosening policy too quickly. Inflation is expected to pick up later this year and domestic price pressures, such as wage growth, still pose an upside risk to the outlook. That should result in a gradual path for interest rate cuts going forward, with rates likely to stay unchanged this month.”
Findings last week from Incomes Data Research revealed the UK median pay deal agreed by organisations fell to 4% in the three months to July, down 0.8 percentage points from the three months to June, and the lowest since August 2022.
Brightmine reported last month that the median basic pay award for the quarter from May to July of this year had fallen to 4.5%. Its next monthly report on pay settlements is published next week.
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