BOE Rate Decision Hinges on UK Inflation Report

The UK's inflation report for August is set to be released today, and it will have significant implications for the Bank of England (BOE) rate decision tomorrow.

Headline annual inflation is expected to rise to around 3.1% in August, up from 2.9% previously, which is roughly three tenths above the BOE's own forecast.

However, policymakers are more interested in whether the latest energy shock is spreading to other key categories rather than simply reacting to higher fuel costs themselves.

The consensus for core annual inflation is expected around 2.6% in August, keeping unchanged from the reading previously.

An analyst estimates that a rise of around 10% m/m in air fares would alone contribute roughly 8 bps to services inflation.