U.K. Inflation Eased a Little in August But Core Prices Remained Strong

By Geoffrey Smith 

Investing.com -- The rate of inflation in the U.K. dropped back under 10% in August as falling fuel prices took a little of the heat out of the ongoing cost-of-living crisis. 

Consumer prices rose 0.5% from July, a fraction less than the 0.6% expected, bringing the annual CPI rate down to 9.9% from 10.1%. Analysts had expected it to rise to 10.2%. H

Producer price pressures also eased marginally, with input prices falling 1.2% on the month, their first decline in two years. That brought the annual rate of factory gate inflation down to 16.1% from 17.1%.

The data left the pound flat at $1.1500. 

However, as with the U.S. CPI on Tuesday, core inflation was stronger than expected, suggesting that the headline figures were flattered by the drop in fuel prices.

The core CPI rose 0.8% on the month compared to the 0.3% gain in July, pushing the annual rate up to a new high of 6.3%. Household services prices rose strongly, as did food prices. 

"Price pressures are likely to remain elevated this month as well, despite some softening in fuel prices, as food and services costs continue to rise," said analysts at Saxo Bank in a morning note. "Further gains in inflation can be expected in October, but the capping of household energy bills may help to soothe inflationary pressures thereafter."

Simon French, chief economist with Panmure Gordon, said the numbers didn't change his view that the Bank of England will hike its key rate by 75 basis points when it holds its Monetary Policy Committee meeting next week. The meeting has been delayed by a week due to the national period of mourning for Queen Elizabeth II.