MNI BRIEF: Slower UK Inflation Offers BOE Rate Path Options
The fall in both services and core inflation will give added weight to policymaker arguments for a pause after the likely September hike.
Headline inflation slowed again in the UK in August dipping to 6.7% y/y, the lowest level since February 2022, data released Wednesday by the Office for National Statistics showed. Services inflation, closely watched by the Bank of England, fell to 6.8%, below the 7.4% seen in July -- and below highest City expectations for a rise to 7.6%.
Core inflation was also markedly lower, driven by slower services inflation, falling to 6.2% from 6.8% in July.
This month's slowdown was driven by falls in overnight accommodation and air fares, as well as base effects on food prices, ONS chief economist Grant Fitzner said., although they were partially offset by "an increase in the price of petrol and diesel compared with a steep decline at this time last year"..
The Bank of England's Monetary Policy Committee will vote on policy later Weds, with the decision set for release at midday Thursday, London time. Both the lower than expected headline number and the decline in annual services CPI will give ammunition to policymakers arguing for another hike and then hold rates steady for a 'duration', or a Table Mountain scenario as cheif economist Huw Pill explained (MNI BOE WATCH: 25bp Hike Expected, Eyes On "Table-Top" Policy)