UK inflation stable ahead of Bank of England rate decision

Inflation in the UK remained steady at 2.2 percent in August, signaling a possible halt in interest rate cuts by the Bank of England. The latest data showed the Consumer Prices Index matching July’s level, above the BoE’s 2.0 percent target. Analysts predict that the central bank will likely refrain from reducing its key interest rate this week, after a 25 basis point cut in August.

This news boosted the pound against the dollar, as the BoE is expected to maintain its rate at 5.0 percent amidst ongoing uncertainties. The central bank’s decision last month to decrease borrowing costs was the first since the beginning of the pandemic in 2020. Inflationary movements in August were influenced by airfare increases and reduced prices at petrol stations, restaurants, and hotels.

Despite challenges like supply-chain disruptions and global inflation spikes, the UK economy is facing stagnation. The new Labor government led by Prime Minister Keir Starmer is striving to revive growth after years of Conservative rule and consecutive interest rate hikes by the BoE.