UK inflation remained unchanged at 2.2% in August, above the Bank of England’s target of 2%. Despite this, experts predict that the Bank will keep interest rates unchanged for now. Core inflation increased to 3.59% year-on-year, driven by a rise in services inflation to 5.56%. However, food and energy inflation surprised on the downside.
Professor Costas Milas of the University of Liverpool believes that recent public sector pay deals could push up inflation further in the coming months. Although there are calls for a rate cut by the TUC, the Bank of England is less likely to act following the rise in core inflation. Factory gate inflation slowed in August, which may ease the pressure on consumers.
Overall, the Bank of England is expected to leave interest rates unchanged, with the next rate cut predicted to take place in November. While inflation remains above target, underlying inflation is rising, suggesting caution in adjusting monetary policy. The Fed’s expected rate cut could also influence the Bank’s decision. The Resolution Foundation predicts stability in interest rates, with the Bank likely to monitor developments closely. Despite the challenges faced by many families, the focus remains on building a strong economy for the future.
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