The Office for National Statistics has confirmed that CPI inflation remained unchanged at 2.2% in August, a figure that will frustrate those hoping for a rate cut but offers a modest reprieve for households battered by the cost of living crisis. The headline rate, hovering just above the Bank of England's 2% target, is a testament to the sticky nature of price pressures in the service sector.
But beneath the surface, a more nuanced story emerges: food price inflation has eased to 1.3%, its lowest level since October 2021. This is not cause for celebration, but it is a sign that the worst of the grocery shock is behind us.
The data will fuel the debate over whether the Bank should move faster on rate cuts. Markets are now pricing in a 50% chance of a reduction in November, but Governor Bailey will be wary of declaring victory too soon. The economy may be defying the doom-mongers, but the cost of capital remains elevated, and the spectre of a fiscal reckoning looms.
It is a fragile stability, not a triumph.
