UK Service‌ Inflation Remains High, Interest Rate Cut Unlikely in September

Xinhua Finance, London, September 18 – The latest ‌UK inflation data has reduced the possibility‌ of the Bank of England cutting interest rates in September. According to the UK National Statistics Office,⁣ the‍ Consumer ⁣Price Index (CPI) ‌rose by 2.2% year-on-year in August, the same as in July.

While the CPI​ annual ⁤rate remained unchanged, core inflation and ⁢service inflation in the UK increased in August. Core inflation ⁢rose by 3.6% year-on-year, higher than the 3.3% ⁤level in‌ July, and service inflation increased⁤ from 5.2% in July to 5.6%.

The main reason for the high service ​inflation in the UK⁤ was the increase in⁢ transportation⁤ prices, particularly air tickets. The UK transportation price index rose by ⁤1.2% year-on-year in August, the⁤ fastest increase since May 2023. Air ticket prices ⁣rose by 22.2%‌ between July ‍and August.

In addition to transportation prices, housing prices and rental costs in ⁣the UK are ‌also‍ rising. The rent level in the UK rose by 8.4% year-on-year in August, with a 9.6% increase in England. The average house price ‍in the UK rose by 2.2% year-on-year in July.

David Bharier, head of research at the ‌British Chambers of Commerce (BCC), noted that the UK’s core inflation rate rose slightly to 3.6% in⁤ August,​ and service ‌industry inflation rose to 5.6%. Anna Leach, chief economist at the Institute of Directors, pointed out that the inflation results in August ‍were in line with expectations and that inflation is expected to‍ rise further in the coming months.

The Bank of England ⁤may not cut interest rates in September, given the ‌high service inflation and core inflation‍ data. David Bharier stated that⁣ the Bank of England will be cautious about cutting interest​ rates and is likely to keep them unchanged. Anna Leach, however, believes ​that the Bank of England⁤ will cut interest rates further ​later this year.

Rising house and‌ rental prices in the UK may be a concern for the Bank of England in the coming months. House prices in⁣ the UK have been rising due⁤ to slowing inflation and the central bank’s interest rate cuts. A report ⁣by Rightmove, a British housing agency, showed that the price of homeowners​ in the UK rose by 0.8% to 370,759 pounds in September.

Market institutions​ expect that rents and‍ house prices in the UK will continue to rise in the following months of this year, given the‍ expectation that the Bank of​ England will continue to cut ⁢interest rates. Amanda Bryden, director of the Halifax Mortgage Department, pointed ⁢out that⁢ the purchasing power of the British housing market is increasing, and British house prices will rise moderately in the remaining months ‌of⁣ this year.

House prices ⁣and rental costs will push up wage ‍and inflationary pressures. Against this backdrop, the Bank of England’s best option now is probably to wait and see further.