- CPI holds at 2.2% – unchanged from the previous month
- Rising airfares offset falls in hotels, restaurants and at the pump
- Jumps in services and core CPI will trouble central bankers
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK inflation data:
“Surging demand for a couple of weeks in the sun enabled airlines to lift their fares this summer. Since the pandemic people have prioritised making memories with family over other expenses and even though prices have jumped, savvy consumers have found ways to fund their holidays with many plumping for all-inclusive deals that have helped them to budget.
“The uptick in airfares has offset falling inflation elsewhere this summer, holding the UK CPI number at 2.2%, a smidgeon over the Bank of England’s target but one which is likely to result in some caution amongst central bankers later this week.
“Volatility in pricing for things like airfares is less troubling than the stickiness evident in the core data. Chunky pay rises dolled out across the service sector have to be paid for somehow and although the headline number has come in as expected today’s data has cooled market expectation of a second rate cut before November, with just over a quarter now entertaining a September cut.
“For the consumer it is an improving picture, especially when it comes to filling up cars or kitchen cupboards.
“August delivered the 17th consecutive month of falling food inflation, although many shoppers are still struggling with the cost of everyday essentials – something which is likely to get more acute as the nights draw in and the heating goes on.
“For homeowners and would-be homeowners a rate hold may not be quite as bad news as they might fear, with lenders already looking ahead into next year when markets are almost fully pricing in a full 1% cut between now and next March.
“What’s clear is the double digit shocks that households endured in 2022 and early 2023 are behind us, but the impact of those shocks still linger with prices rising less quickly rather than falling and wages only beginning to fill in some of the gaps.”
