In the UK, the inflation rate held steady at 3.8% in August, with a notable increase in food prices. This figure matches the inflation rate recorded in July. The Office for National Statistics (ONS) reports monthly inflation data, highlighting a continuous rise in food prices for the fifth consecutive month, particularly affecting items like cheese, fish, and vegetables.
Food price inflation reached 5.1% in the year leading up to August, marking the highest level in 18 months. Additionally, fuel prices have seen an increase, while hotel costs experienced a smaller decline compared to the same period last year. However, the rise in prices was partially offset by a slower increase in air fares compared to the previous year.
The recent inflation update precedes the Bank of England’s impending announcement on interest rates. Most economists anticipate that the base rate will remain at 4% due to persistent inflation, a weakened job market, and the upcoming Autumn Budget.
The Bank of England aims for a 2% inflation target. Over time, interest rates have fluctuated, with the current base rate standing at 4% following multiple rate cuts. Grant Fitzner, the ONS’s chief economist, noted that various price changes balanced each other out in August, with airfares being the main contributor to downward pressure on inflation.
Chancellor Rachel Reeves expressed understanding for the financial challenges faced by families and emphasized the government’s efforts to alleviate the burden through initiatives like raising the National Living Wage and expanding benefits such as free school meals. In contrast, Shadow Chancellor Sir Mel Stride criticized the persistent high inflation levels, attributing them to policies that he believes are driving up costs for households.
Inflation reflects the fluctuations in the prices of goods and services over time, measured primarily through the Consumer Price Index (CPI). The ONS uses a basket of goods and services to calculate inflation, with the main CPI figure representing an average of these changes. A lower inflation rate does not imply price stability but rather indicates a slower rate of increase in prices.
The Bank of England adjusts interest rates to influence inflation, with higher rates leading to increased borrowing costs. However, this can strain household finances, as seen in the past when the base rate reached a peak of 5.25% in August 2023. Inflation peaked in October 2022 at 11.1%, largely driven by escalating energy and food costs due to increased demand post-Covid and geopolitical conflicts like the Russian invasion of Ukraine.
While inflation briefly dropped to 1.7% in September 2024, it began rising again in October. Stay informed on money-saving tips and exclusive offers by subscribing to the Mirror Money newsletter.
