BoE Weighs Inflation Risks Against Labour Market Weakness

The Bank of England is set to meet on Thursday, just a day after the Federal Reserve's decision. The latest data shows mixed signals for UK policymakers, with inflation above target and producer costs accelerating.

In August, the Consumer Price Index rose from 2.9% to 3.1% year-on-year, while monthly inflation accelerated to 0.5%. However, core CPI remained unchanged at 2.6%, providing some reassurance that the rise in headline inflation has not yet developed into a broad-based acceleration.

The labour market is also softening, with payrolled employment falling by 39,000 over the latest three-month period and by 84,000 from a year earlier. Regular wage growth has moderated considerably, with annual regular-pay growth around 3.5%.