- CPI comes in at 6.7% for the year to August
- Falling food prices largely responsible for the fall
- Fuel costs have crept up
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK inflation figures:
“Just like that what had seemed like a sure thing is cast into doubt. Moments after the shock inflation number was released, the market expectation of a Bank of England rate rise began to plummet.
“Within half an hour what had been a pretty nailed on 80% expectation of another quarter percentage point hike fell to a 50/50 chance that MPC members would vote to press pause on this rate hiking cycle, at least for now.
“After a slew of profit warnings from UK PLC yesterday and a GDP figure that sat badly for the UK economy, the news that inflation has continued to cool is likely give policy makers enough wiggle room to adopt a wait and see strategy.
“It’s important to remember the impact of these rate hikes is a slow burn. What has been done over the past 14 meetings is only just being felt by many businesses and homeowners, with half a million of the latter dreading the anticipated Christmas present of increased mortgage payments at the most expensive time of the year.
“Prices at the pump have shot up as the oil price surged to over $95 a barrel, but that increase has been offset by falling food inflation and, crucially, the core number that strips out the noise from food and fuel volatility has also come down. There’s more good news to be found in producer prices with input and output costs falling year on year.
“Although inflation is falling, that doesn’t mean prices are coming down, and if the Bank of England has grounds to at least skip this rate hike that’s because cracks are beginning to form.
“This winter will still be incredibly tough for millions of households and if it’s a long, cold winter, what had been difficult choices last year may yet become impossible.”
