Headline CPI inflation held steady at 3.8 per cent in August, ending a run of disappointing increases, as a downward contribution from air fares was offset by increases in hospitality and petrol.
There were encouraging signs for policy makers under the bonnet as the closely watched core inflation fell from 3.8 per cent in July to 3.6 per cent in August, while services inflation fell from 5.0 per cent to 4.7 per cent. Of greater concern, however, is food price inflation that disproportionately affects lower-income families, and which hit 5.1 per cent in August – its highest rate since January 2024 (6.9 per cent).
James Smith, Research Director at the Resolution Foundation, said “Several months of disappointing data has highlighted the UK’s unwanted position as an international outlier for ‘sticky’ inflation, with the highest headline inflation of any G7 economy.
“This headline rate held steady last month, at an uncomfortably high 3.8 per cent, but there were encouraging signs under the bonnet as both core and services inflation fell. Sticky inflation is still a problem however, with food prices rising by over five per cent.
“The Chancellor should look to ease the cost of living pressures on struggling families at the Budget in November.”