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Consumer squeeze continues as inflation rises above expectations

12 September 2017

The Office for National Statistics has today announced that UK consumer price inflation increased to 2.9 per cent in August – its joint highest level in more than 5 years.

Emmanuel Afoakwah, investment analyst at Redmayne-Bentley, said: “The squeeze on UK households continues as inflation jumps from 2.6 per cent in July to 2.9 per cent in August, exceeding the expected figure of 2.8 per cent, while wages are currently rising by around 2.1 per cent. Clothing and travel costs have contributed to the rise in inflation with average clothing prices increasing by 2.4 per cent and air fares increasing by 10.9 per cent. Furthermore, fuel prices rose, with petrol prices jumping by 1.8p per litre.

“Prior to the release of August’s inflation figures, Sterling was higher, driven by the added pressure that the Bank of England would face regarding raising interest rates in the face of increasing inflation. This momentum continued after the announcement, with the Pound hitting a one-year high against the US Dollar. Sterling gained a cent against the Dollar to hit $1.3272 at the time of writing, the strongest level for a year.

“However, a combination of weak consumer spending, falling wage growth and ongoing Brexit concerns means that the Monetary Policy Committee members will most likely hold off on interest rate rises when they next meet on Thursday (14th September)."

Author: Ruth Peterson

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