The cost of living in the UK has risen once again, reaching its joint-highest level for more than five years.
The cost of food, clothing and fuel all rose last month, putting pressure on the Bank of England to raise interest rates.
Year-on-year, overall consumer prices rose by 2.9 per cent in August, up from 2.6 per cent in July. The most recent data is higher than many economists forecasted.
Certain items have become more expensive than others since last year's vote for Brexit, with clothing prices rising by 4.9 per cent year-on-year – the biggest increase since the consumer price index (CPI) was launched in 1997.
As the possibility of an interest rate rise looks more likely, the pound has strengthened – providing some good news for those taking a late summer/early autumn holiday. On August 12 sterling hit a one-month high against the euro, as pressure mounted on the BoE’s Monetary Policy Committee to take action.
Concerns over the impact of Brexit on the UK economy have influenced the BoE in its ongoing policy of keeping interest rates unchanged.
Threadneedle Street is keen to avoid any slowdown following the growth enjoyed in the first half of 2017.
The Bank believes inflation will hit 3 per cent in October, largely due to sterling's weakened position after last year’s referendum on EU membership.
Consumers aren’t the only ones to feel the pressure of increased inflation. UK based manufacturers are having to pay more for imported raw materials due to the diminished pound, resulting in increased 'factory gate prices' – the cost of manufactured goods before profit is added.
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