British inflation eased in August but remains close to the previous month’s 40-year peak, official data showed Wednesday, as the country battles a cost-of-living crisis.
Britain’s Consumer Prices Index (CPI) slowed to 9.9 percent on an annual comparison as motor fuel prices fell, after accelerating to 10.1 percent in July, the Office of National Statistics said.
The news comes one week before the Bank of England’s latest interest rate decision, which was delayed from this week after the death of Queen Elizabeth II.
It also follows Tuesday’s higher-than-expected US inflation data, which raised fears of a prolonged period of Federal Reserve interest rate hikes and sparked a markets selloff.
The BoE had last month ramped up its key interest rate by 0.5 percentage points to 1.75 percent, the biggest hike since 1995, as it sought to dampen red-hot inflation.
“A fall in the price of motor fuels made the largest downward contribution,” the ONS said in a statement on Wednesday.
“Rising food prices made the largest … upward contribution” to the inflation rate, it added.
Consumer price inflation has soared around the globe this year owing to sky-high energy and food bills.
This has been caused to a large extent by supply constraints after economies reopened from pandemic lockdowns and in the wake of Russia’s invasion of Ukraine.
British Prime Minister Liz Truss last week announced a two-year freeze on domestic energy prices in an attempt to bring down the tackle the soaring cost of living.
Analysts expect that will bring down inflation somewhat, but remain cautious over the outlook.
“The new measures announced by the government to cap energy prices for households … could see inflation peak at a more modest 10.5 percent in October,” said KPMG UK chief economist Yael Selfin.
“However, with inflation in near double digits, the combination of expected tax cuts and support measures for households may prompt the Bank of England to take a more hawkish stance to avoid higher inflation further down the line.”
The BoE has forecast an inflation-induced UK recession starting this year, and had predicted a peak of 13 percent.
The August rate is still almost five times the BoE’s target level of 2.0 percent.