Britain’s annual inflation rate remained unchanged at 3.8%
in August, the Office for National Statistics (ONS) said Tuesday, matching
July’s figure and market expectations.
The Bank of England, which lowered interest rates to 4%
in August — their lowest in 2.5 years — is expected to keep borrowing costs
steady for the rest of 2025 despite inflation still running nearly double
its 2% target. The BoE forecasts a peak of 4% in September.
The data adds pressure on the Labour government after
the economy stagnated in July and unemployment hit a four-year high
of 4.7%. Finance Minister Rachel Reeves acknowledged families were
struggling but pledged to maintain tight fiscal discipline ahead of November’s
budget.
Analysts warned that a “higher-for-longer” interest
rate environment will keep households and businesses under strain amid high
living costs. While airfares fell in August, the ONS said petrol,
diesel, and food prices rose.
Prime Minister Keir Starmer’s government
continues to face political and economic challenges following last year’s tax
hikes and spending cuts. However, new foreign investment offers a glimmer of
hope, with Microsoft and Google among US tech giants announcing UK
projects this week, coinciding with President Donald Trump’s state visit.
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