UK inflation flattened out in August

Emma Haslett
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Food and alcohol put some upward pressure on inflation (Source: Getty)

Inflation remained flat at 0.6 per cent in August, still way below the Bank of England's two per cent target, official figures have shown.

Figures from the Office for National Statistics (ONS) showed the consumer price index (CPI) missed expectations of a 0.7 per cent rise.

“Fuel costs falling more slowly than a year ago as well as rising food prices and air fares all pushed up CPI in August, but these were offset by hotels, wine and clothing leaving the headline rate of inflation unchanged," said Mike Prestwood, the ONS' head of inflation.

“Raw material costs have risen for the second month running, partly due to the falling value of the pound, though there is little sign of this feeding through to consumer prices yet.”

Currency lag

Tom Stevenson, investment director for personal investing at Fidelity Intnernations, suggested CPI is likely to increase further as the weak pound begins to take its toll.

"The impact of currency changes works with a lag so further rises in CPI should be expected.

"With fresh concerns being raised about growth prospects in the UK, the spectre of stagflation cannot be dismissed – something the Bank of England will be desperate to avoid. So far the impact of Brexit has been muted but with the Bank almost out of ammunition, expect Mark Carney to be pushing for more support from the government in November’s Autumn Statement."

Ipek Ozkardeskaya, senior market analyst at LCG, added: "The rising import price pressure due to a weaker pound should gradually feed into the domestic price dynamics. Today’s inflation read is benign and should not revive any speculations regarding an additional monetary stimulus from the Bank of England."

Meanwhile, figures also published by the ONS today suggested UK house prices continued to climb in July, albeit at a steadier pace.