Inflation in the UK was 9.9% in August, the latest data from the Office for National Statistics (ONS) shows.
Food and non-alcoholic beverages made the largest upward contribution to the monthly rates in August while falling prices for motor fuels resulted in a large offsetting downward contribution.
Last month, the ONS reported inflation hitting double figures at 10.1% in July, rising from 9.4% in June.
In August, Citi bank forecast that inflation would hit 18.6% in January.
The Bank of England (BoE) increased the base rate by 50 basis points to 1.75% on 4 August.
Last week the Monetary Policy Committee (MPC) postponed its meeting and subsequent interest rate decision announcement by one week due to the passing of Her Majesty Queen Elizabeth II.
The increase marked the sixth base rate rise since December 2021 after a decade of historic lows. Interest rates are now at their highest since December 2008.
Interactive Invest senior personal finance analyst Myron Jobson says: “UK inflation defied expectations by dipping ever so slightly in August to 9.9% from a 40-year high of 10.1% in July because of fuel prices falling from record highs.”
“The psychological impact of not having double-digit price rises doesn’t shroud the reality that inflation remains sizzling hot, running at five times the Bank of England target.”
“The fall in price of motor fuels made the largest downward contribution – good news for drivers. This is principally a result of petrol prices falling by 14.3 pence per litre between July and August, taking the annual inflation rate for motor fuels from 43.7% to 32.1%.”
While the cost of fuel is decreasing, Phoebus chief sales and marketing officer Richard Pike notes that everything else is becoming more expensive.
Pike says: “We expect that the BoE will increase interest rates again next week, but it is difficult to see how, at this rate, it can do anything to alleviate increasing inflation.”
He explains that for borrowers “this is a time to take stock, as interest rates rise lenders will be forced into increasing mortgage rates”.
“We have already seen the average rate pass 4%, which will of course put more pressure on households. The figures on arrears from the BoE yesterday showed that the value of mortgages in arrears fell in the second quarter, which is something of a false positive. This quarterly data is now months out of date and interest rates and inflation have been increasing since the end of the period.”
“With this in mind it is only inevitable that the figures we will see in December for Q3 will show a reversal of this trend. For lenders, there are sure to be a number of vulnerable borrowers that are already starting to worry and will need to know where they can get the help they need, before things get too late.”
