UK Inflation Hits 3.1% Amid Transport Cost Surge
UK inflation continues to rise, reaching 3.1% in August, up from 2.9% in July, according to data released by the Office for National Statistics (ONS). The increase is largely driven by transport costs, which rose to 4.6% from 3.6% in July, with motor fuel prices increasing by 27.8% and 20.2% for petrol and diesel respectively.
The NIESR estimates that seasonally adjusted inflation has increased to 4.2%, indicating a strengthening of underlying inflationary momentum. This is higher than the headline rate suggests, and could indicate further price increases in the future.
Global oil prices have risen due to escalating tensions in the Middle East, pushing them above $108 per barrel for the first time since May. This has contributed to the increase in transport costs and is likely to put upward pressure on food prices and energy bills in the coming months.
The Bank of England's Monetary Policy Committee (MPC) is set to make a decision on interest rates tomorrow, but NIESR Associate Economist Charlotte O'Leary expects them to hold rates for now due to subdued wage growth. However, mounting inflationary pressures may eventually lead to a rate hike later in the year.