UK Inflation Hits 3.1%, Pound Unchanged Amid Fed Rate Hike Anticipation

The UK's inflation rate rose to 3.1% in August, its highest level since March, driven by higher prices at the pumps and rising airfares.

The pound was little changed following the data, with expectations surrounding Bank of England (BoE) rate hikes remaining unchanged.

The BoE meets this week and is expected to leave rates unchanged, citing a weak labour market that has helped contain price pressures.

However, UK drivers face expensive petrol costs since 2022, and BoE Governor Andrew Bailey warned of new risks, including rising food prices from challenging domestic weather and the impact of Super El Niño.

The US dollar is pausing around a two-week high ahead of the Federal Reserve rate decision, where the market is 91% convinced that the Fed will hike rates by 25 basis points.