Aberdeen: UK inflation set to rise further in the coming months
Felix Feather, Economist at Aberdeen, comments on the UK inflation figures released this morning:
'As expected, the UK’s inflation rate rose sharply from 2.9% to 3.1% in August, mostly due to high energy prices.
Importantly, there were few signs of the energy price shock spilling over into price setting in domestically determined prices. For example, services inflation, which the Bank of England pays particular attention to, remained at 3.4%, defying expectations for an acceleration.
Looking forward, inflation is set to rise over the coming months. Household energy bills are set to be a key driver of inflation, with the Ofgem price cap rising by 4% in October, and possibly over 20% in January.
Overall, there’s nothing in this report to shift judgement on rates, we see the Bank of England delivering two hikes in November and February. But current market pricing probably overestimates the degree of the upcoming monetary policy adjustment.'
