Inflation holds at 3.8% – industry reaction

Latest Office for National Statistics (ONS) data has shown that inflation held at  3.8 per cent in the year to August. Core Inflation came in at 3.6% in the 12 months to August, down from the 3.8% in July and in line with forecast

Commenting on today’s inflation figures for August, ONS Chief Economist Grant Fitzner said “After last month’s increase, annual inflation was unchanged in August as various price movements offset each other.

“The cost of airfares was the main downward driver this month with prices rising less than a year ago following the large increase in July linked to the timing of the summer holidays. This was offset by a rise in prices at the pump and the cost of hotel accommodation falling less than this time last year.

“Food price inflation climbed for the fifth consecutive month, with small increases seen across a range of vegetables, cheese and fish items.”

Anna Leach, Chief Economist at the Institute of Directors, said “Inflation has stabilised this month, broadly as expected, with rising food and restaurant prices offset by easing seasonal airfare costs. The Bank of England is nearing the end of its rate-cutting cycle, but faces a delicate balancing act: wage growth is softening, yet household inflation expectations are edging up. Households perceive inflation at 4.8% — close to food price inflation at 5.1% and above private-sector pay growth. After years of painful volatility, the priority must be to squeeze inflation decisively out of the system.”

John Phillips, CEO of Just Mortgages and Spicerhaart, sai “Inflation holding steady will have certainly caught many by surprise, as the general consensus was we would see inflation reach double the Bank of England’s target. While this is unexpected and certainly positive news, I still don’t think I’d be planning a rate cutting party for tomorrow. But what it could mean is far better odds for a change in November which had recently seemed off the cards.

“Despite the economy flatlining in July, inflation is still proving particularly stubborn, along with pretty fierce headwinds caused by both global and domestic pressures. As a result, managing inflation still wins the Bank of England’s tug of war instead of stimulating the economy – for now at least.

“Nonetheless, we have seen a good start to September with positive activity across all areas of our business – whether that’s buyer registrations, valuation requests or mortgage appointments. It shows that despite the pressures households are facing, there is still appetite to push on with plans to buy or sell. Key to this is the proactive approach of brokers to stay visible and support clients in navigating the market and their options. No matter what happens to inflation or interest rates, this must remain a priority.”

Martyn Smith, CEO at Black & White Bridging, said “For prospective borrowers waiting in the wings for a better deal, this could be a game-changer.  It’s now critical the Bank of England cuts the base rate again tomorrow to instil further confidence in these borrowers and help landlords and other businesses currently struggling under the weight of high interest rates.We must increase opportunities for investment. We must boost borrowing. We must give borrowers a chance.”

Simon Webb, Managing Director of capital markets and finance at LiveMore saod  “With the market widely expecting inflation to rise, today’s figures will be seen as a surprising but positive development. While it’s unlikely the Bank of England will respond immediately and cut rates tomorrow, steady progress towards the target of 2% inflation could create the space for rate cuts later in the year.

“For borrowers, particularly those in later life, this could bring a renewed sense of stability and confidence when it comes to financial planning. We know many over-50s are still navigating borrowing well into retirement, often while balancing other responsibilities such as caring or part-time work.

“As the outlook improves, it’s an opportunity to reframe the conversation around later life lending, not as a niche market, but as a growing and diverse segment requiring thoughtful, long-term financial solutions.”