UK inflation unexpectedly declines due to falling fuel prices

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Last Updated on September 14, 2022 by Bitfinsider

British consumer price inflation unexpectedly declined in August, according to official data released on Wednesday (Sep 14), providing some respite to households and the Bank of England (BoE) after the CPI rate reached a 40-year high.

According to a Reuters survey, experts expected consumer price inflation to increase even more to a new high of 10.2 percent in August, but instead it decreased from 10.1 percent in July to 9.9 percent in August.

On a non-seasonally adjusted basis, the CPI increased by 0.5% from July to August, less than economists’ expectations of a 0.6% increase, which would have been the same rate as the previous month.

The price of motor vehicle fuel and lubricants fell by 6.8% in August, the most since April 2020.

Financial markets anticipate the BoE to increase rates further next week after delaying this week’s rate decision due to the passing of Queen Elizabeth II, as Britain continues to struggle with the highest inflation rate among the major advanced nations.

The BoE is projected by interest rate futures to increase rates by 75 basis points to 2.5% on September 22. This would be the biggest rate increase since 1989, barring a brief effort to support sterling during a 1992 exchange rate crisis.

Separate information on factory costs and selling prices showed that inflation pressure was less than expected, which was excellent news.

August saw the first monthly decline in input prices for materials and energy in two years, falling 1.2% as a result of falling crude oil prices. Factory selling prices also decreased marginally on a monthly basis.

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