Will UK inflation rise tomorrow ahead of BoE meeting?

Households brace for impact of inflation

More than four in five people (83%) expect inflation to hit their personal finances in the next five years, according to research from Yorkshire Building Society. One of the most damaging effects of inflation is the way it can erode your savings.

Even if inflation were to sit at around 2% (the Bank of England’s target), it would only take 36 years for the value of your savings to halve.

Over the past few years, the rate of inflation has been far higher than this; UK inflation peaked at 11.1% in October 2022. At this elevated level, it would only take around six and a half years for the value of your money to halve.

While investing can be a good way to beat inflation over the long run, we all need to hold a decent amount of cash for day-to-day spending, short-term savings goals and emergencies.

One of the best ways to protect the value of your cash is to find a savings account that offers real returns. Although this is becoming more difficult (as interest rates have come down while inflation has gone up), there are still inflation-busting rates on the market.

Analysis from Moneyfacts, conducted last month, showed 956 accounts were still offering inflation-beating rates in August.

See our round-up of the best easy-access rates, one-year savings accounts, regular saver accounts and cash ISAs for the latest deals on cash savings.

State pensioners more interested in September CPI report

It is August’s inflation figures that we will get tomorrow. Pensioners will have to wait another month for September’s figures (due on 22 October), which will play a role in setting how much state pension they receive in 2026/27.

Under the triple lock policy, state pension payments are uprated annually in line with inflation, earnings growth, or by 2.5% – whichever measure is highest.

September’s CPI report is the one that is used in the calculation. The wage growth figures used cover the period between May and July. These were published in today’s labour market report.

This year’s triple lock calculation will almost certainly be based on earnings growth, as this came in at 4.7% between May and July (including bonuses), whereas September’s inflation reading is expected to come in at 4%.

A 4.7% increase “would see a full new state pension rise from its current level of £230.25 per week to £241.05 per week from April,” said Helen Morrissey, head of retirement analysis at investment platform Hargreaves Lansdown.

“Those retiring on the basic state pension would see their weekly income increase from £176.45 per week to £184.75.”

See also: When will I pay tax on my state pension?

Oasis reunion tour could push hotel prices up

Hotel prices jumped in July, partly off the back of the Oasis reunion tour. This could add pressure in August too, with the concerts continuing into the month. Pantheon Macroeconomics thinks this, combined with other factors like higher food price inflation, will push the headline figure up to 3.9%.

“A jump in food price inflation, a fall in motor fuels last August dropping out of the annual inflation comparison, and hotel prices inflated by an Oasis concert on CPI collection day should more than offset slowing airfare inflation,” said Pantheon’s chief UK economist Robert Wood.

Experts say September rate cut unlikely

The next Monetary Policy Committee (MPC) meeting will take place on 18 September, just one day after August’s inflation report is published. The Bank of England is expected to hold rates at 4%. Economists polled by Bloomberg and Reuters were unanimous in ruling out a September rate cut.

Speaking to MPs earlier this month, the Bank of England’s governor Andrew Bailey said inflation risks had “gone up”. While rates are still on a downward path, he added that there is now “considerably more doubt about exactly when and how quickly we can take those further steps”.

Oxford Economics: Food and petrol could push inflation higher

Advisory firm Oxford Economics is one of the forecasters that thinks inflation will inch up to 3.9% tomorrow. By comparison, the Bank of England’s forecasts point to a 3.8% reading, which is also what Deutsche Bank, the investment bank, is expecting.

A 3.9% forecast “reflects our view that further upward pressure from food prices and a smaller drag from the petrol category should more than offset the impact of a modest fall in services inflation due to July's temporary spike in air fares unwinding,” said Edward Allenby, economist at Oxford Economics.

What to expect from tomorrow’s inflation report

Good afternoon and welcome to our inflation live coverage.

The Office for National Statistics will publish August’s inflation report tomorrow morning at 7am, and it is unlikely to make pretty reading. Forecasters think inflation will either hold steady at 3.8% or creep up slightly to 3.9%, before peaking at 4% next month when September’s figures are released.

July’s reading of 3.8%, published last month, was the highest in 18 months. Higher food prices have been a big driver of increases in recent months.