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ICAEW comment on UK inflation figures

Author: ICAEW

Published: 14 Sep 2022

Responding to the UK inflation figures for August 2022, released by the Office for National Statistics today (Wednesday 14 September 2022), Suren Thiru, Economics Director for ICAEW, said:

“August’s dip in inflation reflects temporary distortions rather than the painful reality facing people and businesses.

“The slowdown partly reflects strong base effects amid the comparison with August 2021, when inflation jumped from 2.0% to 3.2%. A marked fall in fuel prices added to the downward pressure on the headline rate. 

“While a renewed inflationary wave is expected in the short term, inflation now should peak at around 12% in October once the government support kicks in.

“The energy price guarantee is a double-edged sword for inflation. While it cuts the peak through keeping energy bills down, it risks keeping inflation higher for longer by stoking consumer demand through universally increasing household incomes.

“Against this backdrop, a 75-basis point interest rate rise next week is a distinct possibility, despite risking accelerating the UK’s slide towards recession.”