UK inflation data for August came in as expected, with headline CPI remaining unchanged at 2.2% yoy, in line with forecasts. Meanwhile, core CPI, which excludes volatile items such as energy, food, alcohol, and tobacco, showed accelerated from 3.3% yoy to 3.6% yoy.
The breakdown of the data reveals a mixed picture. Goods prices continued to decline, with CPI for goods falling from -0.6% yoy to -0.9% yoy. However, services inflation moved higher, rising from 5.2% yoy to 5.6% yoy, indicating persistent domestic price pressures.
The main driver of the inflationary uptick was airfares, which rose this year after a drop in prices during the same period last year. On the downside, motor fuels, restaurants, and hotels contributed to the moderation of price pressures.
On a monthly basis, CPI increased by 0.3% mom, also meeting expectations.
While BoE is widely expected to hold rates unchanged tomorrow, the rise in core inflation, particularly in services, could lead to more caution regarding future rate cuts if inflation proves to be stickier than anticipated.
