Britain’s inflation rate remained unchanged in August, easing pressure on the Bank of England (BoE) to deliver further interest rate cuts this week.
Data from the Office for National Statistics (ONS) on Wednesday showed the Consumer Prices Index (CPI) held at 3.8 percent, the same level recorded in July. The figure was broadly in line with analysts’ forecasts.
The BoE had lowered its benchmark rate in August to 4 percent — the lowest in two and a half years — but policymakers are now widely expected to hold rates steady at Thursday’s meeting, with markets betting on a pause through the rest of 2025.
The latest inflation figures come against a backdrop of sluggish growth and rising unemployment. The Labour government was dealt another setback last week when official data revealed that the economy stagnated in July.
Separate figures released Tuesday showed unemployment stuck at 4.7 percent, the highest in four years.
Finance Minister Rachel Reeves acknowledged the strain on households, pledging to keep a “tight grip” on public spending while attempting to chart a path for growth ahead of November’s annual budget.
“I know families are finding it tough and that for many the economy feels stuck,” Reeves said.
According to the ONS, falling airfares helped offset higher fuel and food prices in August.
READ ALSO: UK Doctor Faces Tribunal Hearing for Abandoning Patient for Sex
Nonetheless, inflation remains nearly double the BoE’s two-percent target and is expected to climb to around four percent in September.
Lindsay James, investment strategist at Quilter, warned that the figures underline a “higher-for-longer interest rate environment” that will continue to squeeze consumers and businesses.
Britain’s economy has struggled to regain momentum since Labour’s sweeping election victory last year, with tax rises and spending cuts weighing heavily on growth.
Still, optimism flickered this week as US tech giants, including Microsoft and Google, announced fresh investments in the UK during US President Donald Trump’s state visit to London.