UK inflation remained unchanged at 3.8% in August, according to official figures from the Office for National Statistics (ONS), maintaining pressure on households as the Bank of England is widely expected to keep interest rates at 4% this week. The annual rate matched July's level and City economists' forecasts, staying almost double the Bank's 2% target.
The ONS said various price movements offset each other last month. Air fares fell, while petrol and diesel prices rose. Hotel accommodation costs also dropped less than a year ago. Food price inflation climbed for a fifth consecutive month, reaching 5.1% in August, driven by increases in vegetables, cheese, fish, chocolate (up 15.4%), beef, butter and coffee.
Chancellor Rachel Reeves faces scrutiny over Labour's economic management ahead of the autumn budget on 26 November. Business groups warned that measures including a £25bn increase in employer national insurance contributions would force job cuts and price rises. Shadow chancellor Mel Stride said working people and businesses are bracing for more tax rises due to Labour's mismanagement.
Reeves said the government is taking action to help households, adding: 'I know families are finding it tough and that for many the economy feels stuck. That's why I'm determined to bring costs down and support people who are facing higher bills.' The Bank of England forecasts inflation will peak at 4%, potentially delaying further rate cuts after five reductions since summer 2024.
There were some signs of easing price pressures. Services inflation, closely watched by the Bank, slowed to 4.7% from 5% in July. Core inflation, excluding energy, food and tobacco, fell to 3.6% from 3.8%. However, UK inflation remains the highest in the G7, outpacing the US rate of 2.9%. The Trades Union Congress urged the Bank to cut rates, arguing high borrowing costs add to family and business pain without addressing global price pressures.
