Inflation nears 3% in August but economists point to 'deflationary forces'

Inflation rises quicker than expected- latest CPI figures

According to CPI data published by the Office for National Statistics (ONS) the UK's inflation rate leapt from 2.6 per cent to 2.9 per cent last month, outpacing expectations it would only reach 2.8 per cent and reaching its highest rate since May. "The main risk points one needs to watch out for inflation projections going ahead are largely fuel and commodity prices.".

Rising price pressures could keep RBI cautious in the near future, economists say.

"The inflation rate for a range of goods has picked up since past year and the overall rate in the United Kingdom is higher than in most other EU countries, including all of the larger western European nations".

The UK's inflation rate climbed to its highest level in more than five years in August as the price of petrol and clothing rose.

In the meantime, inflation remains higher than earnings growth - which was 2.1% in the three-months to June.

In fact the difference in outlook between the bank and investors is becoming pronounced - despite the Bank's repeated warnings about needing to raise rates sooner and faster than markets expect, markets are pricing in that they will stay at their current 0.25% level until the end of 2018, and not rise above 0.5% until 2021. Mark Carney will certainly be hoping so, as it will save him the trouble of writing to the Chancellor to explain himself.

The low exchange rate pushed clothing and footwear prices up 4.6 per cent in August, a record high, the ONS said. The MPC will announce its latest interest rate decision on Thursday, which is broadly anticipated to see rates remain on hold at 0.25%.

"Over the long term, inflation is rarely a country-specific phenomenon, especially for developed, open, market economies".

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