Lower fuel prices caused an unexpected fall in British inflation in August, official figures showed, but markets are still betting on another big rate hike by the Bank of England later this month
Annual consumer price growth slowed to 9.9% from July's 40-year high of 10.1%, the Office for National Statistics said on Wednesday. This was its first drop since September 2021 and below expectations in a Reuters poll for it to rise to 10.2%.
Financial markets see an 80% chance that the BoE will raise rates by 0.75 percentage points to 2.5% on Sept. 22. This would be its biggest rate rise since 1989, excluding a brief attempt to bolster sterling during a 1992 exchange rate crisis. Britain's inflation is the highest in the G7 group of big advanced economies, although below that in several European countries, including Spain and the Netherlands.The BoE's task of returning inflation to its 2% target has been made slightly easier, in the short term at least, by new Prime Minister Liz Truss's decision to cap household energy prices, which will rise by 25% rather than 80% in October.
Prices for vehicle fuels and lubricants dropped by 6.8% in August, their largest monthly fall since April 2020, and producer price data showed lower pressure in the pipeline.
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