UK inflation flat in August

Twelve-month inflation in Britain stood at 3.1 percent in August, unchanged from the level in July, official data showed on Tuesday.

Analysts had expected the rate to fall to 3.0 percent, according to a poll by Dow Jones Newswires. The August level also remained far above the Bank of England’s 2.0-percent target rate.

The Office for National Statistics (ONS) said the rate of annual inflation was unchanged last month as higher air fares and more expensive clothes and food prices were offset by the falling costs of second-hand cars and energy products.

Month-on-month, Consumer Price Index inflation rose by 0.5 percent in August after 0.2-percent drop in July, the ONS added. Market expectations had been for a rise of 0.4 percent.

The Bank of England has forecast annual inflation to hold above 2.0 percent until the end of 2011 owing to a looming increase in VAT sales tax, before falling under the target level in early 2012.

Following Tuesday’s data, ING Bank analyst James Knightley said although there were concerns about food price inflation and the hike in the VAT rate at the beginning of 2010, “the strengthening seen in sterling should at least help to dampen import price inflation in coming months.

“Meanwhile, a weak economic recovery and the headwinds of major fiscal austerity measures (in Britain) should dampen corporate pricing power and limit the likelihood of second-round price effects in the medium to longer term,” he added.

Source: AFP