"The MPC's guidance is fully consistent with price stability. I can also assure you of my personal commitment to price stability. I certainly have no hesitation in raising interest rates when required."
- Mark Carney, Bank of England Governor
Consumer prices in Britain slowed down slightly last month, as clothing prices and transport costs rose less than a year earlier, the Office for National Statistics said Tuesday. Inflation rose 2.7% in August from a year earlier, the least in three months, and down from 2.8% in the preceding month, meeting analysts' expectations. The less volatile core inflations, which exclude food and energy prices, stood at 2%- unchanged from July. On a monthly basis, inflation rate, however, rose to 0.4% after being flat a month earlier. The largest downward pressure came from a drop in transport, clothing and footwear. Nevertheless, there are concerns that the situation in Syria may push fuel prices higher, reversing the two months of decelerating inflation.
Britain's policymakers are constantly monitoring the inflation rate as it is the measure targeted by the BoE's interest rate-setters, who are currently seeking for a 2% annual inflation. However, they are currently refraining from raising interest rates to control CPI, as the situation in the labour market is still not good enough. While Mark Carney assured markets they will not raise interest rates until the jobless rate has fallen to 7% or even lower, they does not exclude a possibility to raise borrowing costs if inflation is still above 2.5% in 18 months to two years' time.
© Dukascopy Bank SA