© Reuters. FILE PHOTO: An employee sorts products inside Sainsbury’s supermarket in Richmond, west London, Britain, June 27, 2022. REUTERS/Henry Nicholls // File Photo
By David Millliken and Andy Bruce
LONDON (Reuters) – Lower fuel prices led to a surprise drop in UK consumer price inflation in August, official figures showed on Wednesday, helping households and the Bank of England ease slightly after when the CPI rate hit a 40-year high.
The annual consumer price inflation rate fell to 9.9 percent in August from 10.1 percent in July, below economists’ expectations in a Reuters poll for it to rise further. to a new high of 10.2%.
CPI rose 0.5% from July to August on a non-seasonally adjusted basis – below economists’ forecast for a 0.6% rise, the same pace as last month.
Vehicle fuel and lubricant prices fell 6.8% in August, the biggest monthly drop since April 2020.
Britain is still battling the highest inflation among the major advanced economies and financial markets expect the BoE to raise interest rates further next week, after postponing this week’s rate decision after the Queen Elizabeth’s death.
Interest rate futures suggest a 79% chance the BoE will raise rates by 75 basis points to 2.5% on September 22, which would be the biggest rate hike since 1989, excluding one brief attempt to strengthen the pound during the exchange rate crisis of 1992.
Separate factory cost and selling price data brings good news about inflationary pressures in the pipeline, weaker than all forecasts.
Raw material and energy input prices fell 1.2% month-on-month in August, the first drop in two years and were driven by falling prices. Factory selling price also decreased slightly in the month.