Inflation remains at 3.8 per cent for the second consecutive month according to the latest data from the Office for National Statistics.
The follows a rise the previous month, and shows inflation in the economy remains stubbornly high, remaining significantly above than the Bank of England’s 2 per cent target.
Data from the ONS showed that food costs remained a significant driver of inflation in the economy, alongside restaurant and hotel costs.
Next month’s inflation figures will be key when it comes to uprating the state pension next year. But as today’s inflation figures is still considerable lower the average rise in earnings (of 4.7 per cent) it seems likely that the earnings figure will be used to update pensions next year, in line with the triple lock.
Bestinvest personal finance analyst Alice Haine says: that persistent inflation, combined with slugging growth and a cooling jobs markets is likely to pile further pressure on the Chancellor Rachel Reeves, and could signal bigger tax rises in the next budget as she looks to plug the black hole in the public finances.
Quilter investment strategist Lindsay James says: “UK inflation held steady at 3.8 per cent in August, the same as July. Core inflation registered 3.6 per cent, while services inflation slowed to 4.7 per cent, compared with 5 per cent in July, highlighting the persistence of domestic price pressures.
“This outcome broadly confirms forecasts that inflation would hover around 4 per cent through the autumn, with expectations for a slow descent beyond that, potentially not hitting 2 per cent until 2027.
“With regular wage growth running at 4.8 per cent, the risk is that services inflation continues to prove stubborn, making the Bank of England wary of cutting rates prematurely.”
Standard Life managing director for retail director Dean Butler says “These figures come in the context of a finely balanced Bank of England MPC decision to cut interest rates in August. This only squeaked through after a second round of voting – and with inflation climbing higher, a further cut when they meet again this week looks very unlikely.”