Uk Inflation Steady In August

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Uk Inflation Steady In August

Uk Inflation Steady At 2.2% In August

The UK's inflation data is finally released and shows a reading of 2.2% in August. According to the data, the inflation in the services sector has jumped higher, which is closely watched by BoE.

Given the sudden increase in the inflation of services in August, the Bank of England may be inclined to keep the rates unchanged on Thursday.

Uk'S Services Inflation Jumps Higher

The data showed that UK CPI was 2.2% in August, similar to the reading from July. The market players were looking forward to a reading of 2.4%, but the actual reading was -0.2% lower.

Overall, the CPI was good and showed that inflation is indeed slowing down in the UK. However, the one worrying sign was the services inflation, which has moved from 5.2% during July to 5.6% in August.

One of the major reasons behind this jump in the services inflation was a 22.2% increase in the airfares during July-August. Ever since the statistics office started to track the airfares, the recent increase was the 2nd largest in recorded history.

The release of the UK inflation also helped the GBP to strengthen against the US Dollar. It has also lowered the chances of a rate cut by the BoE to around 26%. Right now, there's still a chance that we will get at least 2x rate cuts by the Bank of England by 2024 end.

While the rate cut is delayed for now, it is important to note that it is now sitting at 5.25% - 5.00%. This is a 16 year high and warrants some quick action from the central bank.

According to a senior Chief Economist, the focus of the BoE will be on the inflation measures that are still elevated. A good example of that is services inflation which has gone up while the core CPI has gone down.

That's why it makes sense to think that the Bank of England will be a little more hesitant to lower the rates as compared to the Federal Reserve.

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