UK Inflation Hits Five-Month High of 3.1% as Energy Costs Bite
British inflation rose to 3.1% in August, but stable core and services measures suggest the Bank of England will hold rates.
British consumer price inflation climbed to a five-month high of 3.1% in August, up from 2.9% in July, official data showed on Wednesday. The reading matched the median forecast of economists, who had expected a renewed rise in energy prices following the resumption of conflict in the Gulf.
The figure came in above the Bank of England's July projection of 2.8% for August. Sterling weakened slightly after the release.
Despite the headline acceleration, policymakers are expected to focus on underlying price pressures, which respond less immediately to energy shocks. The Office for National Statistics said core inflation — which strips out volatile items including food and fuel — remained at 2.6% for a fourth consecutive month. Services inflation, closely watched by the central bank as a gauge of wage growth and longer-term pressures, was also unchanged at 3.4%.
The ONS had reported on Tuesday that wage growth remained close to its weakest since 2020.
The Bank of England is widely expected to leave interest rates on hold when it announces its decision on Thursday. Investors currently price roughly a one-in-three chance of a quarter-point hike, though two increases are fully priced in before the end of 2026, reflecting concern that higher energy costs could feed more broadly into prices.
Goldman Sachs said this week it expects the headline rate to peak at 3.9% in early 2027, a level that could heighten the central bank's worries about persistent inflation. Britain's economy grew faster than any other Group of Seven nation in the first half of 2026, a factor that may add to price pressures.