Inflation for the 12 month to August 2024 remained unchanged from the previous month of 2.2 per cent, according to figures from the Office for National Statistics (ONS).
The consumer price index (CPI) remains broadly in line with the Bank of England’s desired two per cent target for inflation which means further interest rate cuts could be on the horizon.
The central bank’s Monetary Policy Committee (MPC) voted narrowly to slash the base from a 16-year high to five per cent with another reduction expected later this year.
Analysts believe the Bank could be in a “strong position to cut rates” following today’s ONS figures.
Grant Fitzner, chief economist at the Office for National Statistics, said: “Inflation held steady in August as various price fluctuations offset each other.
“The main movements came from air fares, in particular to European destinations, which showed a large monthly rise, following a fall this time last year.
High inflation and interest rates have been a weight on the UK economy
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“This was offset by lower prices at the pump as well as falling costs at restaurants and hotels. Also, the prices of shop-bought alcohol fell slightly this month, but rose at the same time last year.
“Following two months of growth, raw material prices fell, driven by lower crude oil prices, while the increase in the cost of goods leaving factories slowed again.”
Darren Jones, Chief Secretary to the Treasury, added: “Years of sky-high inflation have taken their toll; and prices are still much higher than four years ago.
“So, while more manageable inflation is welcome, we know that millions of families across Britain are struggling, which is why we are determined to fix the foundations of our economy so we can rebuild Britain and make every part of the country better-off.”
The ongoing cost of living crisis following the Covid-19 pandemic has resulted in inflation for goods and services skyrocketing in recent years.
In 2022, the CPI rate reached a decades-long high of 11.1 per cent in a blow to consumers.
This resulted in the Bank of England boosting, and holding interest rates to 5.25 per cent.
With inflation easing closer to the financial institution’s target, more rate cuts are likely to happen due to the Bank’s “strong position”, economists claim.
Nathan Emerson, the CEO at Propertymark, outlined why borrowers, notably mortgage holders, will likely benefit from at least one more rate cut this year.
He said: “The positive news from today’s figures is that inflation remains broadly in line with the Bank of England’s target of two per cent, which means that people shouldn’t witness the uncertainty and rapid price rises experienced in 2022 and 2023.
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Earlier this year, the Bank of England voted to cut interest rates
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“Although a further drop in inflation would have of course been welcome news, Propertymark hopes the Bank of England feels in a strong enough position to consider a further cut in interest rates when they meet tomorrow.
“The combination of inflation sitting within bounds and any further cuts in base rate over the coming months has the potential to bring a new wave of confidence and affordability within the housing market.
“However, most importantly, it brings much welcome relief and financial flexibility to many households compared to only six months ago.”
The Bank of England’s MPC will next meet to discuss the base rate on September 19.