UK inflation data for August 2025

The U.K.’s annual inflation rate was steady at 3.8% in August, according to data released by the Office for National Statistics (ONS) on Wednesday.

Economists polled by Reuters had expected inflation to reach 3.8% in the twelve months to August.

August core inflation, which excludes more volatile energy, food, alcohol and tobacco prices, rose by an annual 3.6%, down from 3.8% in the twelve months to July.

“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,” the ONS’ Chief Economist Grant Fitzner said on the X social media platform.

“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, the ONS noted, with small increases seen across a range of vegetables, cheese and fish items.

The data comes after the consumer price index hit a hotter-than-expected 3.8% in July, exceeding forecasts.

Finance Minister Rachel Reeves commented that she recognized that “families are finding it tough and that for many the economy feels stuck. That’s why I’m determined to bring costs down and support people who are facing higher bills.”

Pound sterling was slightly lower against the dollar after the data release, at $1.3637.

The Bank of England is closely watching inflation data after forecasting the consumer price index could peak at 4% in September, before retreating in the early half of 2026.

The central bank cut interest rates in August, taking the key rate from 4.25% to 4%, and saying it would take a “gradual and careful” approach to monetary easing, mindful of inflationary pressures but aware of the need to promote growth and investment.

It next meets on Thursday, but it is not expected to adjust rates this month, and there’s uncertainty as to whether it could cut in November.

Sticky inflation is restricting the opportunity for a fourth rate by the BOE this year, Scott Gardner, investment strategist at J.P. Morgan-owned digital wealth manager, Nutmeg, commented Wednesday.

“While wage growth has fallen in recent months, more progress is required on the inflation front to convince the Bank’s policymakers that a further rate cut is possible in the current economic environment. A fourth rate cut in 2025 will require further labour market weakness, a somewhat pyrrhic victory,” he said in emailed comments.

“With forecasts suggesting inflation could rise even further in the short-term and hit 4% going into the autumn, the cost-of-living strain on household finances will persist in the months ahead,” Gardner said, adding that “in short, already sticky inflation is likely to get stickier.”