Commenting on the new data showing inflation remained at 2.2 percent in August, Julian Jessop, an economics fellow at the free market think tank, the Institute of Economic Affairs, said: « The latest UK inflation data were probably not good enough to tip the balance towards an interest rate cut this week, but the case for another move remains strong.
« The headline rate held at 2.2 percent in August, sticking above the MPC’s two percent target. The core rate (excluding food and energy) rose from 3.3 percent to 3.6 percent, led by a renewed surge in services inflation from 5.2 percent to 5.6 percent.”
However, Mr Jessop noted: “Most of the pick up reflected a jump in air fares, which are volatile from year to year depending on the timing of school holidays. Services inflation is also still lower than anticipated in the Bank’s latest Monetary Policy Report. There is little sign of the ‘wage-price’ spiral that some on the MPC fear.
« Headline inflation may spike in the autumn due to the increase in domestic energy bills, but the Bank has already signalled that it will look past this temporary effect.
« The bigger picture is that the economy is slowing again, the labour market is cooling, and interest rates are higher than necessary to continue bearing down on inflation. »
