- Michael Martins, economic analyst at the Institute of Directors
The UK annual rate of inflation returned to zero in August after a positive reading in July, driven by falls in fuel and clothing prices. According to the Office for National Statistics, British consumer prices remained flat in August, compared with a year earlier, following an annual 0.1% gain in the prior month and staying in line with expectations. Month-on-month, the CPI rose to 0.2% in the reported month after dropping into negative territory in July. The core CPI inflation, which excludes volatile food and energy costs, also decelerated in line with predictions to 1.0% after rising to 1.2% in the preceding month.
The another bunch of data from the UK revealed that factory gate prices fell 0.4% in August and were down 1.8% lower than a year earlier, while input prices declined 2.4% on the month and by 13.8% on the year. Meanwhile, with inflation in the UK hovering around zero, the Bank of England is not under immediate pressure to raise rates from their current ultra-low level of 0.5%, though Britain's economy is showing solid growth. Therefore, a decision on when to hike interest rates is likely to come into sharper focus at the turn of the year.
© Dukascopy Bank SA