Official data released on Wednesday showed that inflation in the United Kingdom declined unexpectedly in August as fuel prices plummeted, providing some relief to households and the Bank of England after the CPI rate reached a 40-year high.
The annual rate of inflation as measured by changes in consumer prices dropped to 9.9% in August from 10.1% in July, which was lower than the 10.2% increase forecast by economists in a Reuters poll.
The U.K. continues to have the highest inflation rate among major advanced economies, and financial markets expect the Bank of England to hike interest rates further next week, after deferring the decision this week due to Queen Elizabeth II’s death.
The Bank of England (BoE) is widely expected to raise interest rates by 75 basis points on September 22 to 2.5%, according to interest rate futures. This would be the BoE’s largest rate hike since 1989, excluding a brief effort to bolster sterling during a 1992 exchange rate crisis.
