UK CPI inflation held at 3.8% in August as food prices continued to rise, piling pressure on consumers.
The August read of 3.8% was exactly the same as in July, suggesting inflationary pressures had eased over the summer, although it’s difficult to call this good news for the economy.
Forecasts point to higher inflation in the coming months, adding to the gloomy picture around the UK economy.
“The UK headline inflation rate stood still in August, but prices are still rising and inflation remains at its highest level since the start of 2024. With forecasts suggesting inflation could rise even further in the short-term and hit 4% going into the autumn, the cost-of-living strain on household finances will persist in the months ahead. In short, already sticky inflation is likely to get stickier,” said Scott Gardner, investment strategist at Nutmeg.
Frustratingly, stubbornly higher inflation is an issue localised in the UK, with other major economies seeing inflation fall enough for central banks to reduce interest rates meaningfully. The US, for example, has a CPI inflation rate of 2.9%.
“The problem is that the current inflationary spike seems to be a uniquely British problem. UK inflation is now appreciably higher than rates we see in European peers or the US, and a lot of that is probably down to own goals on the government’s part,” explained Nicholas Hyett, Investment Manager, Wealth Club.