UK CPI Set to Rise to 3.1 Percent in August
UK headline inflation is forecast to accelerate to 3.1 percent in August, driven by higher energy costs. Core inflation is expected to tick up to 2.7 percent. These figures arrive ahead of the Bank of England meeting on September 17.
UK headline inflation is forecast to rise to 3.1 percent in August. This follows a July reading of 2.9 percent. Core inflation is expected to increase from 2.6 percent to 2.7 percent. The data will be released before the Bank of England meeting on September 17. The central bank is expected to hold interest rates steady.
Higher oil and natural gas prices are the primary drivers of this increase. These factors raise the likelihood that headline inflation peaks near 4 percent later this year. The Bank of England monitors whether these costs spread to other sectors. So far, there is little evidence of such broadening effects.
Energy Costs Drive Inflation Rise
July inflation rose due to higher household energy bills. Social rents also increased more than in the prior year. Petrol and diesel prices dipped briefly in July but rose again in August. This rebound will further boost headline inflation figures. GN markets/inflation (en-US) notes that these energy spikes are the main concern for policymakers.
Wage Growth Remains Under Control
The labor market remains fragile as unemployment rises. Wage growth is under control due to weak demand. Private sector wage growth is expected to slow from 2.8 percent in the second quarter to 2.5 percent in the third. Public sector wage growth remains above 5 percent following recent settlements. Real private sector wages face pressure as inflation picks up.
The Bank of England Decision Maker Panel reports annual wage growth of 4.0 percent in the three months to August. This is unchanged from the previous period. Firms expect year-ahead wage growth to remain at 3.4 percent. This implies a decline of 0.6 percentage points over the next 12 months.
Food Prices Show Benign Trends
Food inflation has remained contained in recent data. Producer price indicators suggest food costs will continue to fall sharply. This trend helps keep consumer inflation expectations steady. There is scant evidence that the war in Iran is having a tangible impact on broader inflation beyond energy prices.
