U.K. headline inflation accelerates to six-month high in August

U.K.’s annual inflation rate accelerated surprisingly to a six-month high in August. The CPI index rose to 2.7 percent in August, rising from July’s 2.5 percent. The August print came in above consensus expectations of a modest fall to 2.4 percent. The above expected figure was mainly driven by a stronger-than-expected rises in prices of goods and services – outside of food and energy. Thus, the core inflation rate, which excludes energy, food, alcohol and tobacco, rose back above the 2 percent mark to 2.1 percent. Accordingly, the RPI rate of inflation also accelerated in the month to 3.5 percent, with both this and the RPI index at 284.2, also coming in above expectations.

The upside surprises to August inflation were widespread with several categories, especially for goods, providing solid upward influences to the month-on-month change in prices. Nevertheless, as some of these came in categories that are especially erratic – computer games and theatre admission tickets - some caution should be taken over reading too much into these, noted Lloyds Bank in a research report.

Baring a sharp fall in September the sharp rise in August now leaves CPI inflation over the quarter on track to surpass the Bank of England’s forecast of 2.5 percent in the third quarter, made in last month’s Inflation Report.

“Near term, the continued feed through from higher utility prices is expected to keep inflation around its current level. Meanwhile, the prospect of some upward impulses from higher food prices is likely, due to inclement weather earlier this year across many parts of the globe”, added Lloyds Bank.

At 12:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at -13.923, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -27.4353. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex