CPI inflation remained at 2.2% in August, unchanged from the previous month.

Higher prices for air fares and second hand cars were the biggest upward pressures on inflation, the ONS said today.

Downward pressures came from the cost of motor fuels and restaurant and hotel costs.

On a monthly basis, CPI rose by 0.3% in August 2024, the same rate as in August 2023.

Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.6% in the 12 months to August 2024, up from 3.3% in July. Meanwhile the CPI goods annual rate fell from negative 0.6% to negative 0.9%, while the CPI services annual rate rose from 5.2% to 5.6%.

The Consumer Prices Index including owner occupiers' housing costs (CPIH) was also unchanged from July, showing an increase of 3.1% in the 12 months to August 2024. On a monthly basis, CPIH rose by 0.4% in August 2024, the same rate as in August 2023.

Core CPIH (excluding energy, food, alcohol and tobacco) rose by 4.3% in the 12 months to August 2024, up from 4.1% in July. The CPIH goods annual rate fell from negative 0.5% to negative 0.9%, while the CPIH services annual rate rose from 5.7% to 5.9%.

In the transport division, overall prices rose by 1.2% in the year to August 2024, compared with a rise of 0.1% in the year to July. ONS said this was the largest annual price rise since May 2023, when the rate was 1.3%. On a monthly basis, prices rose by 1.3% in August 2024 compared with a rise of 0.2% a year ago. The rise was due to an increase in air fares and, to a lesser extent, second-hand cars.

The older measure of inflation, RPI (Retail Prices Index) fell from 3.6% in July to 3.5% in August.

Reaction to the figures from industry experts was one of caution.

Richard Carter, head of fixed interest research at Quilter Cheviot, said: "Today’s inflation figures for August, which shows CPI has remained at 2.2% will likely bolster predictions that the Bank of England will hold rates as it prepares for its upcoming policy decision this week.

"The inflation data, which follows July's rate of 2.2% will unlikely cause the BoE to want to diverge from its current plans especially given core inflation rose by 3.6% in the 12 months to August, up from 3.3% in July. However, the US Federal Reserve, which is expected to deliver a potentially larger-than-anticipated rate cut this week, may play a part in fuelling speculation about the speed of further monetary easing across the world.”

Jonny Black, chief commercial & strategy officer at Abrdn Adviser, said: “The Bank of England will be pleased that last month’s inflation uptick has met a quick end. That being said, Andrew Bailey himself has warned that considering this ‘job done’ might be premature. These are still volatile conditions.

“Advisers have a key role to play in helping clients reflect on the experience of the past few years and stressing why inflation mitigation strategies are so important in their planning, and to re-assure them that their plans have these in place.” 

Daniel Casali, chief investment strategist at wealth manager Evelyn Partners, said: “Although the core measure surprised on the upside in August, the broad downward trend in lower UK CPI inflation is intact, allowing the Bank of England (BoE) to cut interest rates over the coming months.

“However, given that services CPI inflation remains elevated at 5.6% year-over-year and economic growth has picked-up in the first half of 2024, the BoE will probably take a cautious approach in loosening unless there is significant belt tightening coming after the Budget on 30 October that dampens growth expectations."

• The Bank of England is due to review its base rate, currently 5%, tomorrow (19 September). Many experts expect no change to the rate.