UK—Headline Inflation Rises as Expected in August

This morning's CPI data showed headline inflation rising to 3.1% in August (from 2.9%), in line with our forecast and consensus but three-tenths ahead of the BoE's projection. The increase was primarily driven by a further jump in petrol and diesel prices. Core inflation was unchanged at 2.6%, in line with expectations. Within core, there was a marginal downside surprise on services inflation, but this was driven by airfares, while underlying services inflation measures were firmer than we had anticipated. Food, alcohol, and tobacco inflation was little changed, though the sequential pace picked up relative to the recent weaker trend. The increase was driven by energy inflation, which rose to 13.8% (from 9.8%);