The UK's annual rate of consumer price inflation eased back to 9.9 per cent in August, down from a 40-year high of 10.1 per cent in July, the Office for National Statistics said on Wednesday.
Downward pressure from the cost of motor fuel was the main reason for the fall in the annual rate of inflation, the ONS said. Despite the fall, the pace of price increases is still uncomfortably high.
Wednesday's data slightly eases the pressure on the Bank of England, which is battling the highest inflation of any major advanced economy. Economists had expected the rate to remain largely flat. The pound erased earlier gains against the dollar after the release, trading at $1.1495 shortly after 7am UK time (10am UAE).
The reading may fan speculation that inflation has already peaked, relieving some of the pressure on the central bank to act. Prime Minister Liz Truss announced plans to freeze an increase in energy bills last week, a move economists say will prevent a further surge in prices this winter but keep inflation strong well into next year.
“The Bank of England continues to face a tough challenge to bring price growth back towards its target level,” said Rachel Winter, partner at retail investment company Killik & Co. “Policymakers have already hinted that they intend to deliver another increase in the base rate next week, given the ongoing underlying pressures.”
The 6.8 per cent drop in fuel prices was the highest since between March and April 2020, the early days of the pandemic, when oil prices briefly went negative on some markets.
“The easing in the annual inflation rate in August 2022 reflected principally a fall in the price of motor fuels in the transport part of the index,” the ONS said.
“Smaller, partially offsetting, upward effects came from price rises for food and non-alcoholic beverages, miscellaneous goods and services, and clothing and footwear.”
"The new measures announced by the government to cap energy prices for households ... could see inflation peak at a more modest 10.5 per cent in October," said KPMG UK chief economist Yael Selfin.
"However, with inflation in near double digits, the combination of expected tax cuts and support measures for households may prompt the Bank of England to take a more hawkish stance to avoid higher inflation further down the line."
The Bank of England has forecast an inflation-induced UK recession starting this year, and had predicted a peak of 13 per cent.
The August rate is still almost five times the Bank of England's target level of 2 per cent.
Earlier this week, official figures showed the UK's recession-threatened economy rebounded in July, but by less than expected after a hefty fall the previous month. British gross domestic product grew 0.2 per cent after contracting by 0.6 per cent in June. Economists had expected 0.3 per cent growth.
The Bank of England expects the UK economy to enter recession before the end of the year, amid decades-high inflation fuelled by high energy and food bills.
On Tuesday, Britain's unemployment fell to its lowest level since 1974 at 3.6 per cent in the three months to July. However, wages fell further behind spiralling inflation. The number of people on payrolls for August increased by 71,000 on July figures to a record 29.7 million, the ONS said.
The economic inactivity rate — measuring the share of the population who are not in work and not looking for work — increased by 0.4 percentage points on the quarter to 21.7 per cent. This was led by those classified as long-term sick and students.
The lower-than-expected figure in the UK is a stark contrast to Tuesday’s report in the US, which showed inflation is hotter than most were predicting. That reading triggered a rout in stocks as traders became more certain the Federal Reserve will raise interest rates by three quarters of a percentage point next week.
The Bank of England will hold its own meeting next week, after postponing this week's rate decision after the death of Queen Elizabeth II. Investors are torn between anticipating either a 50 or 75 basis-point rise from the current 1.75 per cent.
Interest rate futures show a 79 per cent chance that the Bank of England will raise rates by 75 basis points to 2.5 per cent on September 22. This would be its biggest rate rise since 1989, excluding a brief attempt to bolster sterling during a 1992 exchange-rate crisis.
The British Chambers of Commerce criticised a lack of detail from the government over the plan to cap energy costs.
"There is a limit to how long any firm can sustain these rising costs before something has to give," said Alex Veitch, director of policy at the British Chambers of Commerce. "We know from our research that two thirds of businesses plan to increase their own prices.
“The size of last week’s government intervention on energy prices should have a dampening effect on inflation when it is enacted.
“But the lack of detail on exactly how much help any individual business will get, and for how long, means very few will be planning to invest any time soon.
“There are also a whole host of other issues ranging from transport and shipping costs, raw material prices, energy sector regulation and the tight labour market, that must be addressed."
The Institute for Public Policy Research think tank said further government intervention was needed to prevent “more poverty and more destitution” as a result of rising prices.
"Many people will welcome CPI inflation easing slightly this month, falling from 10.1 per cent to 9.9 per cent, including the Bank of England, who are deciding whether to raise interest rates next week," Dr George Dibb from the centre-left institute said.
“However, this headline figure has been pulled down by falling petrol prices, and it hides worrying news that the prices of food and clothing are continuing to accelerate upwards.
“High inflation means high prices, and without intervention this will lead to more hardship, more poverty and more destitution."
Four reasons global stock markets are falling right now
There are many factors worrying investors right now and triggering a rush out of stock markets. Here are four of the biggest:
1. Rising US interest rates
The US Federal Reserve has increased interest rates three times this year in a bid to prevent its buoyant economy from overheating. They now stand at between 2 and 2.25 per cent and markets are pencilling in three more rises next year.
Kim Catechis, manager of the Legg Mason Martin Currie Global Emerging Markets Fund, says US inflation is rising and the Fed will continue to raise rates in 2019. “With inflationary pressures growing, an increasing number of corporates are guiding profitability expectations downwards for 2018 and 2019, citing the negative impact of rising costs.”
At the same time as rates are rising, central bankers in the US and Europe have been ending quantitative easing, bringing the era of cheap money to an end.
2. Stronger dollar
High US rates have driven up the value of the dollar and bond yields, and this is putting pressure on emerging market countries that took advantage of low interest rates to run up trillions in dollar-denominated debt. They have also suffered capital outflows as international investors have switched to the US, driving markets lower. Omar Negyal, portfolio manager of the JP Morgan Global Emerging Markets Income Trust, says this looks like a buying opportunity. “Despite short-term volatility we remain positive about long-term prospects and profitability for emerging markets.”
3. Global trade war
Ritu Vohora, investment director at fund manager M&G, says markets fear that US President Donald Trump’s spat with China will escalate into a full-blown global trade war, with both sides suffering. “The US economy is robust enough to absorb higher input costs now, but this may not be the case as tariffs escalate. However, with a host of factors hitting investor sentiment, this is becoming a stock picker’s market.”
4. Eurozone uncertainty
Europe faces two challenges right now in the shape of Brexit and the new populist government in eurozone member Italy.
Chris Beauchamp, chief market analyst at IG, which has offices in Dubai, says the stand-off between between Rome and Brussels threatens to become much more serious. "As with Brexit, neither side appears willing to step back from the edge, threatening more trouble down the line.”
The European economy may also be slowing, Mr Beauchamp warns. “A four-year low in eurozone manufacturing confidence highlights the fact that producers see a bumpy road ahead, with US-EU trade talks remaining a major question-mark for exporters.”
Temple numbers
Expected completion: 2022
Height: 24 meters
Ground floor banquet hall: 370 square metres to accommodate about 750 people
Ground floor multipurpose hall: 92 square metres for up to 200 people
First floor main Prayer Hall: 465 square metres to hold 1,500 people at a time
First floor terrace areas: 2,30 square metres
Temple will be spread over 6,900 square metres
Structure includes two basements, ground and first floor
Vidaamuyarchi
Director: Magizh Thirumeni
Stars: Ajith Kumar, Arjun Sarja, Trisha Krishnan, Regina Cassandra
Rating: 4/5
Results
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Why are asylum seekers being housed in hotels?
The number of asylum applications in the UK has reached a new record high, driven by those illegally entering the country in small boats crossing the English Channel.
A total of 111,084 people applied for asylum in the UK in the year to June 2025, the highest number for any 12-month period since current records began in 2001.
Asylum seekers and their families can be housed in temporary accommodation while their claim is assessed.
The Home Office provides the accommodation, meaning asylum seekers cannot choose where they live.
When there is not enough housing, the Home Office can move people to hotels or large sites like former military bases.
SPECS
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Farage on Muslim Brotherhood
Nigel Farage told Reform's annual conference that the party will proscribe the Muslim Brotherhood if he becomes Prime Minister.
"We will stop dangerous organisations with links to terrorism operating in our country," he said. "Quite why we've been so gutless about this – both Labour and Conservative – I don't know.
“All across the Middle East, countries have banned and proscribed the Muslim Brotherhood as a dangerous organisation. We will do the very same.”
It is 10 years since a ground-breaking report into the Muslim Brotherhood by Sir John Jenkins.
Among the former diplomat's findings was an assessment that “the use of extreme violence in the pursuit of the perfect Islamic society” has “never been institutionally disowned” by the movement.
The prime minister at the time, David Cameron, who commissioned the report, said membership or association with the Muslim Brotherhood was a "possible indicator of extremism" but it would not be banned.
Skoda Superb Specs
Engine: 2-litre TSI petrol
Power: 190hp
Torque: 320Nm
Price: From Dh147,000
Available: Now
UAE currency: the story behind the money in your pockets
Brief scoreline:
Liverpool 2
Mane 51', Salah 53'
Chelsea 0
Man of the Match: Mohamed Salah (Liverpool)
Brief scores:
Arsenal 4
Xhaka 25', Lacazette 55', Ramsey 79', Aubameyang 83'
Fulham 1
Kamara 69'
The distance learning plan
Spring break will be from March 8 - 19
Public school pupils will undergo distance learning from March 22 - April 2. School hours will be 8.30am to 1.30pm
Staff will be trained in distance learning programmes from March 15 - 19
Teaching hours will be 8am to 2pm during distance learning
Pupils will return to school for normal lessons from April 5
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
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TOURNAMENT INFO
Women’s World Twenty20 Qualifier
Jul 3- 14, in the Netherlands
The top two teams will qualify to play at the World T20 in the West Indies in November
UAE squad
Humaira Tasneem (captain), Chamani Seneviratne, Subha Srinivasan, Neha Sharma, Kavisha Kumari, Judit Cleetus, Chaya Mughal, Roopa Nagraj, Heena Hotchandani, Namita D’Souza, Ishani Senevirathne, Esha Oza, Nisha Ali, Udeni Kuruppuarachchi
It
Director: Andres Muschietti
Starring: Bill Skarsgard, Jaeden Lieberher, Sophia Lillis, Chosen Jacobs, Jeremy Ray Taylor
Three stars
Defence review at a glance
• Increase defence spending to 2.5% of GDP by 2027 but given “turbulent times it may be necessary to go faster”
• Prioritise a shift towards working with AI and autonomous systems
• Invest in the resilience of military space systems.
• Number of active reserves should be increased by 20%
• More F-35 fighter jets required in the next decade
• New “hybrid Navy” with AUKUS submarines and autonomous vessels
Tips to keep your car cool
- Place a sun reflector in your windshield when not driving
- Park in shaded or covered areas
- Add tint to windows
- Wrap your car to change the exterior colour
- Pick light interiors - choose colours such as beige and cream for seats and dashboard furniture
- Avoid leather interiors as these absorb more heat
PROFILE OF HALAN
Started: November 2017
Founders: Mounir Nakhla, Ahmed Mohsen and Mohamed Aboulnaga
Based: Cairo, Egypt
Sector: transport and logistics
Size: 150 employees
Investment: approximately $8 million
Investors include: Singapore’s Battery Road Digital Holdings, Egypt’s Algebra Ventures, Uber co-founder and former CTO Oscar Salazar
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The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
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