British inflation unexpectedly holds steady in August, keeping the chance of another Bank of England rate cut on track despite a big rise in raw material costs after June’s vote to leave the European Union. Ivor Bennett reports.
It's probably a good time for sterling to toughen up. The new plastic five pound note - rip-proof, waterproof - but will it be Brexit proof? It was thought its post-referendum drop would push prices higher in the UK. But inflation too, it seems, is made of stronger stuff. Unexpectedly holding steady in August at 0.6 percent. SOUNDBITE (English) KEN ODELUGA, MARKET ANALYST, CITY INDEX, SAYING: "There was more resilience in these systems than perhaps we assessed. We're seeing this across the board, on the consumption side, on the production side, by no means has the UK economy fallen off a cliff in fact it hasn't particularly slowed down." Seasonal factors could be one reason why Consumers favouring the sunshine over shops While any increases, in food and air fares, have been offset By things like cheaper clothing, hotels and wine. Raw materials is where the weak pound has had an effect though. Manufacturing input costs are up 7.6 percent on last year, the biggest jump since December 2011. But for now, it's not filtering through to consumers. Strengthening the case perhaps for another rate cut. SOUNDBITE (English) KEN ODELUGA, MARKET ANALYST, CITY INDEX, SAYING: "For the banks measures to actually be more effective we do need a weaker pound. So therefore, I think that rather than discouraging the bank from easing future, this should at the very least, not stay their hand." The immediate horizon is also somewhat hazy with wages, jobs and retail sales data all out this week. So for now, it's case of making hay while the sun shines Something the British are used to.