LONDON: British inflation accelerated to a five-month high of 3.1% in August from 2.9% in July, official figures showed a day before the Bank of England is expected to announce that it is keeping interest rates on hold despite the rise in price pressures.
The increase was in line with the median forecast of economists polled by Reuters who predicted consumer price inflation would speed up due to a renewed climb in energy prices caused by the resumption of the conflict in the Gulf.
The BoE forecast in July that annual inflation would stand at 2.8% in August.
Sterling fell slightly after the inflation figures were published on Wednesday.
Despite the headline rate of inflation coming in higher than the central bank expected, policymakers are likely to pay more attention to underlying measures of price growth which are impacted less immediately by the jump in energy costs.
The Office for National Statistics said its measure of core inflation - which excludes volatile items such as food as well as fuel - held at 2.6% for a fourth month in row in August.
Inflation in Britain's services sector - something the BoE watches closely as it reflects wage growth and longer-term inflation pressures - was also unchanged at 3.4%.
ONS data published on Tuesday showed wage growth remained close to its weakest since 2020.
Investors see a one-on-three chance of the BoE hiking rates by a quarter point on Thursday. However, two increases are fully priced in before the end of 2026, reflecting concerns about the risk of the jump in energy costs pushing up prices more broadly.
Goldman Sachs said this week it expected Britain's headline inflation rate to peak at 3.9% in early 2027, a level likely to make the BoE more worried about long-term inflation problems.
Britain's economy grew by the most among the Group of Seven nations in the first half of 2026, potentially adding to inflation pressure. - Reuters
