(CTN News) – According to data released Wednesday by the Bank of England, inflation in the UK unexpectedly slowed in August to an 18-month low, sparking hopes that this week’s widely-forecasted interest rate hike could prove to be the bank’s last for the time being.
There was a slight drop in the Consumer Prices Index from 6.8 percent in July, according to the Office for National Statistics (ONS), in a statement on the eve of the Bank of England’s latest monetary policy announcement.
The drop in the unemployment rate was the lowest since February 2022 and defeated expectations that it would rise to 7.1 percent as a result of higher energy prices.
Despite the US Federal Reserve’s plans to hold rates later in the day, the pound slipped almost 0.4 percent to $1.2347 on Wednesday following the release of Wednesday’s news.
Hunt, the finance minister of the Conservative government, said that his government’s plan to reduce inflation is “working” although he conceded that it is still too high at the moment.
The news follows data that showed eurozone inflation slowed in August as well, just one day after data showed it had slowed slightly.
Earlier today, the surprise fall in UK inflation led to a kneejerk selloff in sterling. The data cements the expectation that the Bank of England’s next interest rate hike could also be its last one, according to Swissquote Bank analyst Ipek Ozkardeskaya.
It is worth noting that, despite the drop in inflation, the rate in the UK remains the highest in the G7 group of rich nations, after peaking at an historic high of 11.1 percent in October last year, a 41-year high.
As a result of the steep rise in inflation in recent months, workers in the public and private sectors have been staging regular stoppages for almost 18 months.
As part of a recent walkout in England, medical consultants and junior doctors working for the country’s National Health Service joined together for the first time ever on Wednesday in their first ever joint strike.
As part of its bid to bring down high inflation, the Bank of England has thus far raised its key interest rate 14 times in a row to the current level of 5.25 percent, up from the previous level of 5.25 percent.