“With CPI remaining steady in August at 2.2%, headline inflation continues to move into slightly calmer waters. However, some of the underlying data shows that clear areas of volatility remain.
“Core inflation has increased slightly to 3.6%, services CPI has risen to 5.6%, and owner occupier housing costs have climbed to the highest rate since March 1992. By contrast, prices in the goods sectors continue to fall.
“For many SMEs, the damage of high inflation and high interest rates has already been done to cash flow and their ability to invest. In our recent Quarterly Economic Survey, 49% of businesses cited inflation as concern, though this is down from the all-time high of 84% seen in 2022.
“Today’s data is in line with our own forecasts which expect an uptick in CPI to around 2.6% by the end of this year. Global conflicts, trade tensions and rising energy costs are all major areas of uncertainty. We then expect inflation to slow to around 2.2% by the end of 2025.
“The Bank of England is taking a cautious approach to cutting the interest rate and is likely to hold tomorrow. Businesses will also be keeping an eye on the impact of the Federal Reserve decision this evening, where the first cut to the US interest rate in four years is widely expected.”
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