UK CPI - Britain's inflation problem won't budge

17th September 2025

Annualised inflation came in at 3.8% in August, in line with the 3.8% reported in July.

Annualised inflation was forecast to come in at 3.8%
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.

Nicholas Hyett, Investment Manager, Wealth Club said, "Overall inflation is stuck at nearly twice the Bank of England's target rate. For poorer consumers the effective rate is probably higher still, since food accounts for a larger proportion of their total spending and food prices have risen 5.1% year-on-year.

Stubbornly high inflation means it's unlikely that the Bank of England can bail out the economy with cuts. That is doubly bad news for the government, which desperately needs either growth to pick up or rates to come down in order to free up some financial headroom.

The problem is that the current inflationary spike seems to be a uniquely British problem. UK inflation is now appreciably higher than rates we see in European peers or the US, and a lot of that is probably down to own goals on the government's part. Things like food retail and hospitality employ large numbers of comparatively lowly paid staff, where simultaneous increases to employers' national insurance and the national living wage have substantially increased costs and led to a corresponding increase in prices. Big increases to public sector pay are also still feeding through sectors like education and healthcare.

Over time those effects will fade. But until they do, inflation is going to remain a source of pain for the government and the public at large."