Inflation moderates again in August, welcome relief for BOE

Charlie Huggins, Manager of the ‘Quality Shares Portfolio’ at Wealth Club, commented:

“Inflation moderated again in August and came in lower than expected, partly due to an easing of food and non-alcoholic beverage prices. This is very welcome news for consumers and the Bank of England alike and will reinforce the sense that UK interest rates are close to peaking.

The reopening of supply chains, falling logistics costs and greater caution from businesses with their hiring and spending plans are all helping to tame the flames of inflation. The heat also seems be coming out of food prices which rose by a much more palatable 0.3% between July and August, down from a rise of 1.5% between the same two months a year ago. This cost of the weekly shop is a key barometer of consumer sentiment so this is excellent news.

Moderating inflation is also good news for homeowners and first time buyers, with mortgage rates coming down in recent weeks. With these latest inflation figures, the prospect of further cuts to the cost of borrowing in the coming weeks has increased.

We are not yet out of the woods. Wages are rising rapidly, sterling still remains weak and oil prices are going up. All of these things have potential to cause further inflationary headaches for the Bank of England.

For now though, the trend is in the right direction. While price rises are still much higher than anyone would like, there is no longer a sense that inflation is out of control.”