UK inflation was 3.8% in August, the same as July, according to the Office for National Statistics. Airfares fell after the July spike and helped offset higher petrol and diesel prices, while demand for meals out and overnight stays remained strong as concerts and other events drew crowds.

Food and drink inflation rose to 5.1% in August from 4.9% in July, marking the fifth consecutive monthly increase and the highest level since January 2024. Prices for vegetables, milk, eggs, cheese and fish contributed to the uplift in the overall rate.

ONS chief economist Grant Fitzner said airfares were the main downward driver, with prices rising less than a year ago after the summer holiday spike in July. He added that petrol and hotel costs fell less than they did a year earlier, helping to offset the fall in airfares. Food price inflation continued to climb across a range of items, including vegetables and dairy products. Government responses to rising costs were debated, with the Chancellor noting steps to reduce costs for households and critics arguing policy choices were pushing up prices. Retailers pointed to higher employer National Insurance contributions and new packaging taxes as factors behind food inflation. Analysts expect inflation to stay firm and for food inflation to rise further this year, with Pantheon Macroeconomics predicting a peak near 4% in September before easing, potentially prompting the Bank of England to hold rates at the upcoming meeting. Separately, the ONS said CPIH fell to 4.1% in August from 4.2% in July, while the RPI rate eased to 4.6% from 4.8%.