The UK’s inflation rate reduced in August as a result of the downbeat cost of fueling. Although the price of food is still on the rise while there is a persistent cost-of-living crisis in the country.
The UK’s Office for National Statistics published a report on Wednesday where it said the country’s consumer price index increased by 9.9% on an annual basis. It comes a bit under the general prediction of 10.2% by a Reuters poll conducted among economists. The figure was also lower than that of July which was 10.1%.
The consumer price index, however, increased by 0.5% month-on-month and under its predictions. Core inflation figures, minus food and energy, increased by 0.8% M-on-M and did a 6.3% rise Y-on-Y as the predictions expected.
The Office for National Statistics stated further in its paper that the decline seen in the fuel pump price was about the biggest downward contributor to the CPI and CPIH yearly inflation rate change from July to August this year. The increasing cost of food, on the other hand, amounted to being the biggest upward contributor to inflation rate change.
The UK is currently undergoing a historic crisis this year with regard to the cost of living. The cost of energy and food has jumped so much that increased wages are not catching up with the inflation rate. It has, therefore, resulted in one of the biggest falls in the capacity of wages recorded.
The PM’s Huge Task
The new British Prime Minister, Liz Truss, last week announced that there will be an emergency package to cap the annual energy bill for households at £2,500 for two years. There will also be a package like that for businesses in the country for the coming six months, and more support will be worked on for other sectors of the economy.
Financial analysts are expecting the measures announced by the Prime Minister to cut down the inflation rate just on a short-term basis, but they fear it would increase inflation in the medium term. The packages are estimated to be worth about £130 billion.
Meanwhile, the Bank of England will announce another interest rate decision next week after postponing it as a result of the Queen’s demise. The market and observers expect the bank to increase rates by up to 75 basis points as it tries all desperate moves against inflation.
The Bank of England predicted that inflation would reach its peak at 13.3% by the end of this year. Policymakers will now have to revisit their position in view of the Prime Minister’s announcement to cap energy prices.