Headline inflation remained at 2.2% in August, still slightly above the Bank of England’s (BoE) 2% target.
Core consumer price inflation (excluding energy, food, alcohol and tobacco) rose to 3.6% in August however, up from 3.3% in July.
This increase in core inflation resulted from a rise in transport costs across the country, most notably in airfares, which rose by about 22.2% between July and August.
Moreover, with inflation still above target, expectations that the BoE will hold rates steady this week have grown.
Derrick Dunne, chief executive officer at YOU Asset Management, said: “Rising core inflation won’t give the Bank of England much comfort ahead of more potential rate cuts, especially as the US Fed moves to begin its own cuts.”
Susannah Streeter, head of money and markets at Hargreaves Lansdown, added: “It still seems likely that they [the BoE] will decide to keep interest rates paused this month, and instead wait to cut rates again in November and December.
“That is the scenario being priced in by financial markets, which see more than a 73% likelihood that rates will be kept on hold but that more cuts will come later in the year.”