Ella 
UK inflation data for August remained in line with expectations. The overall annual price growth rate remained at 2.2%, the core price growth rate increased to 3.6%, and the service price inflation rate increased from 5.2% to 5.6%.
This is not as hawkish as it first seems. The main reasons for the jump in service price growth are the base effect and the increase in air ticket prices during the summer vacation peak season. This is particularly evident on European routes, where prices rose by 22.2% between July and August, the largest monthly increase since 2001. If you think this summer trip will cost more, you’re wrong.
However, there are some positive signs in today’s data that service price growth may slow in the future. For example, the biggest decreases in the service price index were in restaurants and hotels.
One of the dominant themes in financial markets over the summer has been falling oil prices, with motor fuel down 3.4% compared with a year ago. Oil prices continued to fluctuate in September, so UK headline inflation is likely to come under further downward pressure in the coming months.
