by William Schomberg and Andy Bruce
LONDON (Reuters) – Inflation in the United Kingdom slowed unexpectedly in August, official data showed on Wednesday, which could prompt the Bank of England (BoE) to opt for a pause in its rate hikes. ‘interest.
According to the Office for National Statistics (ONS), consumer prices in the United Kingdom rose 6.7% year-on-year last month, while economists polled by Reuters on average forecast an acceleration to 7. 0% after an increase of 6.8% in July.
Excluding energy and food, the increase in consumer prices stood at 6.2%, which also marks a slowdown after the increase of 6.9% a month earlier. The Reuters consensus was 6.8%.
On a monthly basis, however, overall inflation started to rise again (+0.3%), while so-called core inflation recorded a deceleration to 0.1%, against forecasts of +0.7 respectively. % and +0.6%.
On the foreign exchange market, after the publication of this statistic, the pound sterling fell to 1.2334 dollars, a low since May 30 against the greenback.
On the London Stock Exchange, the FTSE index advanced 0.52% in the morning, outperforming other European markets.
The Bank of England (BoE) holds a monetary policy meeting on Thursday and investors now estimate a 50% probability of a status quo on its rates after 14 increases in a row since December 2021, which brought its main rate director at 5.25%.
The probability of a BoE rate pause was just 20% on Tuesday.
According to the ONS, the slowdown in inflation is linked to a drop in the prices of hotel nights and plane tickets, often volatile components, and to a smaller increase in the prices of food products compared to the same period in 2022.
This offset rising fuel prices and increased taxes on alcoholic beverages.
INFLATION THAT REMAINS HIGH
The BoE said last month it expected inflation of 7.1% year-on-year in August before a sharp deceleration to around 5% in October. Even at this level, inflation would remain more than twice its target of 2%.
Some economists therefore believe that the new data could be insufficient to push the BoE to change course.
“The inflation figures should not deter the Bank of England from raising interest rates tomorrow (Thursday),” predicts Yael Selfin, chief economist at KPMG UK.
“There are new concerns about the price of oil, which has risen by more than 25% since June, and potential pressures on global food prices. These could not only further slow the disinflation process but also reverse the trend in falling inflation expectations, causing further concern for the Bank of England,” she adds.
Inflation in Britain remains among the highest in Western Europe, with Austria and Iceland the only two countries to post a higher figure.
Consumer price figures for August were, however, welcomed by the British government, with Prime Minister Rishi Sunak pledging to halve inflation this year ahead of elections due in 2024.
“Today’s news shows that the plan to tackle inflation is working, plain and simple,” Finance Minister Jeremy Hunt said.
“But it still remains too high, which is why it is all the more important to stick to our plan to reduce it by half in order to be able to ease the pressure on households and businesses. C “is also the only path to sustainably higher growth,” he added.
(With William James, Claude Chendjou, edited by Bertrand Boucey)
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