UK inflation remained steady at 3.8 percent in August, according to official figures from the Office for National Statistics, maintaining a higher rate than both the United States (2.9 percent) and euro zone (2.1 percent). The persistent inflation, driven primarily by a 5.1 percent year-on-year increase in food and non-alcoholic beverage prices, has reinforced expectations that the Bank of England will delay interest rate cuts until 2025.
While core inflation (excluding energy, food, and tobacco) eased to 3.6 percent and services inflation slowed to 4.7 percent, the headline rate remains well above the central bank's 2 percent target. The Bank of England projects inflation will rise to 4 percent in September and stay above target until spring 2027, with its benchmark interest rate currently holding at 4 percent.
Finance Minister Rachel Reeves has acknowledged the ongoing pressure on households and indicated plans to address costs in the November budget, though fresh tax increases are expected following previous social security contribution hikes. Economists suggest that a loosening labor market may eventually help reduce wage growth and align UK inflation more closely with other major economies.
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