Inflation remained unchanged at 2.2 per cent over the 12-month period to August 2024, data from the Office for National Statistics has revealed.
The latest inflation data showed the consumer price index remained at 2.2 per cent in August, the same level recorded in July.
Similar stagnation was also present in the price index including owner occupiers’ housing costs which rose by 3.1 per cent in the 12 months to August 2024.
This also remained unchanged when compared to July.
Quilter Cheviot head of fixed interest research, Richard Carter, said: “Today’s inflation figures for August will likely bolster predictions that the Bank of England will hold rates as it prepares for its upcoming policy decision this week.
“The inflation data will be unlikely to cause the BoE to want to diverge from its current plans.”
He explained that the Monetary Policy Committee has already cautioned investors not to expect sequential rate cuts at every meeting given inflation is still not cemented at the 2 per cent target and is likely to rise further as the year continues.
“Despite stagnating growth over the summer months there is not going to be a swift rate cutting cycle and will only ease pressure on the economy gradually,” he added.
Additionally, the data showed core inflation, which excludes energy, food, alcohol, and tobacco, rose by 3.6 per cent in the 12 months to August 2024.
This represented an increase from the 3.3 per cent that was recorded for the 12 month period to July 2024.
Core inflation including owner occupiers’ housing costs also experienced an increase, rising from 4.1 per cent in July to 4.3 per cent in August.
Fidelity International investment director, Tom Stevenson, described the findings as a “headache” for those setting the Bank of England’s rates.
Stevenson pointed out that, with the headline rate remaining unchanged and core inflation being “sticky” by rising to 3.6 per cent, there were “mixed messages” in the inflation data.
He argued these mixed messages underline the challenge the Bank of England faces in setting monetary policy in a less stable and predictable environment for prices.
“With the new Labour government pushing for higher growth and productivity, and without the stabilising forces of globalisation, cheap energy and EU membership, inflation is likely to be more volatile in future,” he explained.
“However, the direction of travel for UK interest rates looks set even if the timing of rate cuts is not. With growth stagnating over the summer and headline inflation remaining close to target, the next cut looks nailed on for November, even if it does not come tomorrow.
“That should keep a lid on the pound, whether the Federal Reserve opts for the expected quarter point rate cut this week or the jumbo half point cut that remains a possibility.
“For investors, the window of opportunity to lock in higher interest rates on cash is starting to close.”
tom.dunstan@ft.com
