LONDON- Lower fuel prices caused an unexpected fall in British inflation in August, official figures showed on Wednesday, offering some respite to households and the Bank of England after inflation hit a 40-year high the month before.
The annual rate of consumer price growth fell to 9.9 percent in August from 10.1 percent in July, its first drop since September 2021 and below economists’ expectations in a Reuters poll for it to rise further to a fresh high of 10.2 percent.
Sterling weakened on the news, but economists said they expected inflation to rise further later this year, and that the Bank of England would still have to raise rates next week after postponing this week’s decision after Queen Elizabeth’s death.
“Overall and core UK CPI inflation haven’t peaked yet. As such, the Bank of England will have to continue turning the screws,” said Paul Dales, chief UK economist at consultants Capital Economics.
CPI rose by 0.5 percent from July to August on a non-seasonally adjusted basis – below economists’ forecasts for it to rise by 0.6 percent, the same pace as the month before.
Prices for vehicle fuels and lubricants dropped by 6.8 percent in August, their largest monthly fall since April 2020.
However, Britain is still battling the highest inflation among the world’s seven largest advanced economies, although some EU countries – including the Netherlands and Spain – have higher rates.
Natural gas prices have surged across Europe following Russia’s invasion of Ukraine, even in countries such as Britain which imported very little.
