IoD: August inflation data should support at least one more rate cut this year

Commenting on today’s data from the Office for National Statistics, that showed the annual rate of CPI inflation holding at 2.2% in August 2024, Anna Leach, Chief Economist at the Institute of Directors, said:

“Today’s inflation outturn is in line with expectations and doesn’t change our view that there’ll be a further rate cut later this year. Inflation is expected to be a bit higher in the coming months, following confirmation from Ofgem that the energy price cap will rise by 10% in Q4. Services inflation and wage inflation also both remain uncomfortably high. However, inflation should moderate further out as both services and wage growth continue to drift lower, and inflation expectations moderate further.

“As the Budget edges closer, the key priority for the UK is to shift onto a higher growth path. Challenging public finances reflect the impact of past shocks on the economy, but also a structural weakness in UK investment – both public and private. Updated fiscal rules that accommodate borrowing for investment, a business tax roadmap that provides a supportive platform for business decision-making, an industrial strategy that clearly underpins the priorities for UK growth, and well-designed policies to draw people back into the labour market will all help cement the foundations for stronger non-inflationary growth.”