British inflation "high fever does not recede", the central bank faces heavy obstacles in cutting interest rates.

In August, the UK inflation rate remained at its highest level in over a year and a half, a worrying data that could make Bank of England officials cautious about further rate cuts. Data released by the UK Office for National Statistics on Wednesday showed that the Consumer Price Index (CPI) rose by 3.8% year-on-year in August, the same rate as in July, in line with predictions from the Bank of England and private sector economists. Despite a decrease in volatile airfares, increases in fuel prices, dining, and hotel prices offset this impact. Food inflation continued to rise to 4.8%, the highest level since early 2024; while service sector inflation fell to 4.7%, it still remained above the acceptable range for the Bank of England. The above data highlights the dilemma facing Bank of England officials: while the labor market is gradually cooling down, policymakers are concerned that persistently high price pressures are continuously pushing up consumer inflation expectations. The Bank of England expects inflation to peak at 4% in September, double its 2% target. The market expects the Bank of England's Monetary Policy Committee to keep rates unchanged at 4% on Thursday, and may pave the way to keep rates unchanged for a longer period, ending the rhythm of "cutting rates every quarter" maintained since August last year. Currently, the market generally expects interest rates to remain unchanged for the whole year, and only one more rate cut is expected by the end of 2026. After the data was released, the pound's exchange rate against the dollar remained unchanged, slightly below the two-month high touched on Tuesday; market expectations for interest rate trends also remained unchanged. The UK appears "out of step" with other developed economies: the US inflation rate is already below 3%, and the market widely expects the Fed to announce a rate cut later today; while the eurozone inflation rate is close to the European Central Bank's 2% target. Zara Nokes, a global market analyst at J.P. Morgan Asset Management, said: "The current inflation situation in the UK is becoming more severe, and unfortunately, it may deteriorate further before things improve. The Bank of England is almost certain not to cut rates this week, and the likelihood of another rate cut is decreasing, unless there is a more significant deterioration in the labor market." Due to the influence of the summer travel period, UK airline ticket prices rose by 30% in July at one point, while in August, they only rose by 2.1% month-on-month. As airline ticket prices rose by 22% in August last year, the data for the same period this year actually had a downward effect on inflation. Grant Fitzner, Chief Economist of the UK Office for National Statistics, pointed out that the slight rise in fuel prices and the decrease in accommodation costs compared to the same period last year offset the impact of the fall in airfare on inflation. Food price inflation has continued to rise for the fifth consecutive month, with slight increases in various vegetables, cheese, and seafood prices, with food prices rising by 0.4% month-on-month in August. There are also signs that UK businesses are passing on the increased costs resulting from the Labour Party's April increase in wage taxes and minimum wage standards to consumers. Data from the UK Office for National Statistics show that dining and hotel prices rose by 3.8% year-on-year, the fastest rate since November 2024 (shortly after the Labour Party announced the increase in employment taxes). Other economic data also indicates that price pressures could persist. There are signs that the labor market has stabilized in recent months, and GDP growth is stronger than expected by the Bank of England. Monica George Michail, Assistant Economist at the UK's National Institute of Economic and Social Research, said: "The data released today confirms that inflation has become entrenched." She added that the report confirmed "the inflation pressure brought about by rising labor costs, high inflation expectations, and the upward risks from rising food prices." Some rate setters are concerned about the increase in household inflation expectations - a trend that could trigger a vicious cycle: inflation expectations push up wage demands, while wage increases will further drive up prices. Given the significant impact of food expenditures on family life, they are closely monitoring the trend of significant increases in food prices.