UK inflation steady at 3.8% in August

The UK’s annual inflation rate held at 3.8% in August, matching expectations, but remaining the highest among major advanced economies. This reinforced investor expectations that the Bank of England (BoE) will keep interest rates unchanged through the end of the year.

Inflation for consumer services - closely watched by the BoE as a gauge of domestic price pressures - slowed to 4.7% from 5% in July, the Office for National Statistics said on Wednesday.

Core inflation, which excludes energy, food, and tobacco prices, fell to 3.6% from 3.8%.

The UK’s inflation rate remains higher than that of the US (2.9%) and the eurozone (2.1%).

BoE expects inflation to stay above its 2% target until spring 2027, Reuters reported.

The central bank is expected to hold interest rates at 4% in its Thursday meeting, after a 25-basis point cut in August, as signs emerge of a slower pace of easing due to inflation staying above target.