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The rate of inflation remained steady at 2.2% in August, unchanged since July, yet still above the Bank of England’s target of 2%.The fall was helped by downward contributions from hotels and restaurants, with costs in the segment falling to 4.4% in the month, down from 4.9% in the year to July, marking the lowest rate since July 2021.
Although food and energy prices also continued to fall over the month, this was in part offset by transport, where prices rose by 1.2% in the month. This was particularly affected by high air fares, which rose by 22.2% between July and August 2024.
The BoE’s Monetary Policy Committee will announce its latest rate decision tomorrow (19 September) after cutting the rate to 5% in August, the first reduction in more than four years.
Grant Fitzner, chief economist at the ONS, said: “Inflation held steady in August as various price fluctuations offset each other. The main movements came from air fares, in particular to European destinations, which showed a large monthly rise, following a fall this time last year.
“This was offset by lower prices at the pump as well as falling costs at restaurants and hotels. Also, the prices of shop bought alcohol fell slightly this month, but rose at the same time last year.”
Reacting to the figures, Martin Sartorius, principal economist, CBI, said: “Inflation has fallen short of the Bank of England’s latest forecast expectations for the second month in a row. This will be welcomed by households and businesses, although they will still be feeling the pinch from three years of elevated costs growth.
“While the Bank’s Monetary Policy Committee will be reassured by today’s data, they’re likely to remain wary of loosening policy too quickly. Inflation is expected to pick up later this year and domestic price pressures, such as wage growth, still pose an upside risk to the outlook. That should result in a gradual path for interest rate cuts going forward, with rates likely to stay unchanged this month.”
