{"id":626958,"date":"2026-09-17T00:22:56","date_gmt":"2026-09-17T00:22:56","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/626958\/"},"modified":"2026-09-17T00:22:56","modified_gmt":"2026-09-17T00:22:56","slug":"uk-inflation-rose-to-3-1-in-august-ahead-of-bank-of-england-rates-call-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/626958\/","title":{"rendered":"UK inflation rose to 3.1% in August ahead of Bank of England rates call \u2013 The Irish Times"},"content":{"rendered":"

UK inflation accelerated to 3.1 per cent in August, worsening the squeeze on households and businesses and keeping open the prospect of a Bank of England<\/a> rate increase this year.<\/p>\n

Wednesday\u2019s figure from the Office for National Statistics was above July\u2019s 2.9 per cent reading and in line with the prediction of economists polled by Reuters.<\/p>\n

Rising petrol prices were the major driver of August\u2019s increase, with higher household energy bills also contributing, the ONS said.<\/p>\n

The increase takes inflation further above the BoE\u2019s 2 per cent target as the Monetary Policy Committee (MPC) prepares to set its key interest rate on Thursday. Economists and traders expect the MPC to hold its rate at 3.75 per cent, but signal that an increase in borrowing costs could come as soon as its November meeting.<\/p>\n

Despite the energy shock from the Iran war, the MPC has resisted lifting interest rates as officials await further evidence on whether higher inflation is becoming entrenched in the economy.<\/p>\n

The MPC voted 6-3 to hold rates at its last meeting in July, exposing deep divisions on how to respond to surging oil and gas prices. <\/p>\n

Yael Selfin, chief economist at KPMG, said rising energy prices were likely to test the BoE\u2019s \u201cwait-and-see approach\u201d on rates.<\/p>\n

\u201cThe MPC will be wary of a prolonged period of above-target inflation feeding into significant wage changes and price-setting behaviour,\u201d she said. \u201cThere is little evidence of that occurring so far, but without a marked improvement in the outlook, the balance of risks could shift towards a rate rise before the end of the year.\u201d<\/p>\n

The steep rise in global energy costs has prompted the European Central Bank to raise borrowing costs twice since June, while traders are betting the Federal Reserve will later on Wednesday lift interest rates for the first time since 2023.<\/p>\n

The blistering rally in oil prices poses a significant political challenge to UK prime minister Andy Burnham, who was swept into Downing Street by Labour MPs on the back of a promise to ease the cost of living for voters.<\/p>\n

But a steep rise in government bond yields is estimated to have more than halved the government\u2019s fiscal headroom, limiting the scope for giveaways in the October Budget. <\/p>\n

Responding to August\u2019s figures, chancellor John Healey said: \u201cThe war in the Middle East is impacting on inflation worldwide, not just here at home. In our bills, our weekly shop and at the petrol pumps. We have taken early action to help families and give businesses breathing space.\u201d<\/p>\n

Andrew Griffith, shadow chancellor, took aim at the government for August\u2019s increase, saying: \u201cInflation is now at 3.1 per cent, meaning that every family is paying the price for Labour\u2019s choices.\u201d<\/p>\n

Despite the pickup in headline inflation, Wednesday\u2019s data suggested that the spillover of energy prices into the wider economy remained limited \u2013 a key point for those MPC members who have voted to hold rates since the Middle East conflict began in February.<\/p>\n

Services inflation, closely watched by rate-setters as a gauge of domestic price pressures, held steady at 3.4 per cent in August, below economists\u2019 expectations of 3.5 per cent. Core inflation, which excludes energy and food, remained at 2.6 per cent during the month.<\/p>\n

Official figures on Tuesday underlined the continued weakness of the jobs market and subdued wage growth, with average weekly earnings, excluding bonuses, 2.9 per cent higher in the three months to July compared with a year earlier.<\/p>\n

Francesco Pesole, strategist at ING, said there was \u201cstill no evidence that inflationary pressures are spreading beyond energy [prices]\u201c, which \u201cgives BoE doves something to cling on tomorrow\u201d.<\/p>\n

Economists cautioned that the expected acceleration in headline inflation in coming months, driven by higher oil and gas prices, could prompt the MPC to raise rates later this year, even if officials resist making further increases.<\/p>\n

Traders continued to expect a string of rate increases over the coming year, but following the inflation figures, cut bets on a rise at this week\u2019s meeting from 35 per cent to 20 per cent.<\/p>\n

The 10-year gilt yield fell 0.02 percentage points to 5.38 per cent, and the two-year yield, which is more sensitive to changing interest rate expectations, fell 0.03 percentage points to 4.86 per cent. The pound was slightly weaker at $1.347.<\/p>\n

CPI inflation is now expected to hit or exceed 4 per cent by early next year \u2013 double the BoE\u2019s target. <\/p>\n

Andrew Goodwin, UK economist at Oxford Economics, said August\u2019s figures offered \u201cno evidence that second-round effects are emerging\u201d, but added that \u201cthe pickup in external price pressures has been so great that it looks increasingly likely to force the MPC\u2019s hand\u201d. \u2013 Copyright The Financial Times Limited 2026<\/p>\n","protected":false},"excerpt":{"rendered":"UK inflation accelerated to 3.1 per cent in August, worsening the squeeze on households and businesses and keeping…\n","protected":false},"author":2,"featured_media":626959,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[51215,85530,17559,72,943,113,61,60],"class_list":["post-626958","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-andrew-bailey","tag-andy-burnham","tag-bank-of-england","tag-business","tag-cost-of-living","tag-economy","tag-ie","tag-ireland"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/626958","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=626958"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/626958\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/626959"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=626958"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=626958"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=626958"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}