The UK’s inflation rate hit its joint highest level in more than five years in August, driven by rising clothing and petrol prices.
UK inflation measured by the Consumer Prices Index rose to 2.9 percent in August, according to statistics from the Office for National Statistics released on Tuesday, up from 2.6 percent in July.
Air fares rose between July and August, alongside a jump in clothing and motor fuels prices. Clothing and footwear rose 4.6 percent year-on-year, hitting their highest level since records began, partly because of rising import costs for retailers in the wake of Brexit.
The inflation figure are likely to have an impact on the Bank of England’s decision on monetary policy, with the Committee meeting later this week to discuss the interest rate.
Capital Economics is predicting a split within the MPC, with economist Paul Hollingsworth saying: “[The] figures are likely to provide further ammunition to the more hawkish members of the MPC at this Thursday’s meeting, and as a result we expect the vote to be split once again.”
However, he added: “With mixed signals on the current strength of the economy and the majority of the Committee appearing to be comfortable with a temporary, exchange-rate driven pick-up in headline inflation, we don’t think that the MPC will be panicked into raising interest rates imminently.”