ONS figures showed that in the three months to May, real wages in the UK saw their sharpest decline since records began in 2001.
Henry Nicholls | Reuters
LONDON — Inflation in the UK slowed in August as fuel prices fell, although food prices continued to rise as the cost of living crisis continued in the country.
The consumer price index rose 9.9% annually, according to estimates published Wednesday by the Office for National Statistics, fractionally below a 10.2% consensus forecast among economists polled by Reuters. It was also lower than the July figure of 10.1%.
Month-on-month, consumer prices rose 0.5%, fractionally below forecasts. Core inflation, excluding volatile energy, food, alcohol and tobacco, was up 0.8% month-on-month and 6.3% year-on-year, in line with expectations.
A decline in the price of motor fuels has been the largest downward contributor to the change in both annual CPIH and CPI inflation between July and August 2022, the ONS said in its report.
“Rising food prices were the largest, partly compensating, upward contributor to the change in rates.”
Sterling was roughly flat against the dollar on Wednesday morning, trading around $1.1490.
The UK has been hit by a historic cost of living crisis this year as food and energy prices skyrocket and wage increases fail to keep pace with inflation, leading to one of the steepest declines in real wages ever.
Last week, new British Prime Minister Liz Truss announced a fiscal emergency package capped at £2,500 ($2,881.90) over the next two years, with an equivalent guarantee for businesses over the next six months and further support in the pipeline for vulnerable groups. sectors.
Analysts expect the measures – costing the state treasury around £130 billion – to sharply reduce inflation prospects in the short term, but raise them in the medium term.
‘Could be a fluke’
The Bank of England will announce its latest monetary policy decision next Thursday after a delay caused by the death of Queen Elizabeth II, and it is widely expected to opt for a sharp 75 basis point hike in interest rates as it slows inflation. seems to be decreasing.
At its last meeting, the Bank forecast inflation to peak at 13.3% before the end of the year, and policymakers will review their outlook in light of the announcement of Truss’ new energy ceiling.
“With hope, the cap on energy bills could mean inflation is now nearing its peak, although last month’s drop could likely be a fluke and we may see inflation rise even further in the coming months,” said Richard Carter, head of fixed income. values. research at Quilter Cheviot.
“While the energy plan can help, it will come at the cost of higher borrowing and government spending, which could encourage the Bank of England to raise interest rates even further than originally expected.”