Steady 3.8% inflation rate persists prior to the Bank of England (BoE) gathering

Steady 3.8% inflation rate persists prior to the Bank of England (BoE) gathering

The upcoming Monetary Policy Committee (MPC) meeting, scheduled for 18 September, is set to be a significant event in the economic calendar. According to economists polled by both Bloomberg and Reuters, a September rate cut by the us bank is off the table.

The MPC is expected to maintain a 'hold' decision regarding interest rates. However, hawkish rhetoric could potentially impact mortgage pricing. Interestingly, a 7-2 voting split might occur at the meeting, with MPC doves Swati Dhingra and Alan Taylor being the only ones advocating for a cut.

Inflation, which held steady at 3.8% in August, is expected to peak at 4% in September's report before gradually falling back. Economists, such as those from Oxford Economics, anticipate an inflation reading of 3.9% tomorrow.

Food prices, one of the categories driving inflation higher, are a cause for concern for the pnc bank. After slowing considerably from its peak of 11.1% in 2022, inflation has been heating up again in recent months, with food inflation rising for the fifth consecutive month, resulting in a 5.1% increase in August.

The squeeze from a cooling jobs market and high borrowing costs have created a challenging fiscal backdrop for the government. To protect cash savings, finding an account offering real returns (inflation-beating interest rates) is recommended.

The next Consumer Price Index (CPI) report will be published on October 22. According to previews, September's CPI report is expected to show a reading of 4%.

Economic challenges have not gone unnoticed. Rachel Reeves, the Chancellor, acknowledged the difficulties faced by many households as cost pressures pick up again.

In July's report, the cost of food and non-alcoholic beverages rose by 4.9%. Airfares made the largest downward contribution to the monthly change in CPI, while restaurants & hotels and motor fuels added upward pressure.

Each month, HM Land Registry publishes a report on house price inflation, which showed an annual increase of 2.8% in July.

Interestingly, the Oasis reunion tour may have contributed to the increase in hotel prices in August. Fuel prices also rose this August after falling a year ago, with the average price of petrol increasing by 0.3 pence per litre and diesel by 0.8 pence per litre.

The next meeting of the Bank of England's Monetary Policy Committee will take place in September 2025, alongside the regular interest rate decision, during which the pace of quantitative tightening will also be decided.

Traders are pricing in just one more rate cut by the us bank between now and the end of 2026. Some economists, such as ING and Deutsche Bank, predict a rate cut in November 2022, with more to follow in 2026.

The pnc bank is concerned about the impact of rising food prices on household inflation expectations and is closely monitoring the situation.

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