British consumer price inflation unexpectedly fell in August, according to official data released on Wednesday, providing some respite to households and the Bank of England after the CPI rate reached a 40-year high.
In August, the annual rate of consumer price inflation decreased to 9.9% from 10.1% in July, falling short of economists’ predictions in a Reuters poll that it would increase even more to a new high of 10.2%.
On a non-seasonally adjusted basis, the CPI increased by 0.5% from July to August, less than economists’ expectations of a 0.6% increase, which was the same rate as the previous month.
The price of motor fuel and lubricants fell by 6.8% in August, the most since April 2020.
Financial markets anticipate the Bank of England to increase rates further next week after delaying this week’s rate decision due to Queen Elizabeth’s passing. Britain continues to struggle with the highest inflation rate among the world’s major advanced economies.
With the exception of a brief effort to support sterling during a 1992 exchange rate crisis, interest rate futures indicate a 79% chance that the BoE will raise rates by 75 basis points to 2.5% on September 22. This would be the biggest rate increase since 1989.
Separate information on factory costs and selling prices showed that inflation pressure was less than expected, which was excellent news.
August saw the first monthly decline in input prices for materials and energy in two years, falling 1.2% as a result of falling crude oil prices. Factory selling prices also marginally decreased on a monthly basis.
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