UK Inflation Set to Rise as Energy Costs Bite

The UK's Consumer Price Index (CPI) is expected to rise in August due to higher energy costs, according to Continuum Economics. The headline annual inflation rate increased to 2.9% in July and is forecasted to reach 3.1% in August. Core inflation also ticked up to 2.7%, from 2.6% previously.

The Bank of England (BoE) meeting on September 17 is expected to keep interest rates on hold, given the backdrop of higher oil and natural gas prices. However, the BoE is still concerned about whether this increase in energy costs will lead to a broadening of inflation pressures via second-round effects.

So far, there is little sign of any spill-over to wages or other parts of the CPI basket. Food inflation remains contained, with producer price data suggesting it will continue to fall sharply over the next couple of months.