UK inflation fell for the first time in almost a year in August as a drop in fuel prices offered some unexpected – and probably brief – respite to households and the Bank of England after inflation hit a 40-year high the month of July.
The annual rate of consumer price growth fell to 9.9% in August from 10.1% in July, its first drop since September 2021.
The Reuters reports that Sterling weakened but economists said they expected inflation to rise further later this year, and that the Bank of England would still have to raise rates next week after postponing this week’s decision after Queen Elizabeth’s death.
“Overall and core UK CPI inflation haven’t peaked yet. As such, the Bank of England will have to continue turning the screws,” said Paul Dales, chief UK economist at consultants Capital Economics.
CPI rose by 0.5% from July to August on a non-seasonally adjusted basis – below economists’ forecasts for it to rise by 0.6%, the same pace as the month before.
Prices for vehicle fuels and lubricants dropped by 6.8% in August, their largest monthly fall since April 2020.
However, Britain is still battling the highest inflation among the world’s seven largest advanced economies, although some EU countries – including the Netherlands and Spain – have higher rates.
Writing by Annabel Nwachukwu