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Odds Of UK Interest Rate Cut This Week Fall After Inflation Sticks At 2.2%; Post Office CEO Stepping Down – Business Live

Odds of an interest rate cut tomorrow fallThe Bank of England is less likely to cut interest rates tomorrow, the City believes, after this morning’s inflation report showed a rise in core inflation in August.

The money markets show that the odds of the BoE making no change to borrowing costs at noon on Thursday have risen to 73% this morning.

That’s up from 65% before we learned that headline inflation stuck above the Bank’s target in August, at 2.2%.

Monica George Michail, associate economist at research institute NIESR, says the Bank will have noted that underlyinng inflation “remains elevated”, even though headline CPI inflation was unchanged:

“Annual CPI inflation in August remains unchanged from July at 2.2%. Core and Services inflation rates have slightly gone up, after an encouraging fall in July, recording 3.6% and 5.6%.

Given that inflation is set to gently rise towards the end of the year, and that underlying inflation remains elevated, this reduces chances of a rate cut tomorrow, and new developments will be closely monitored by the MPC”

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Although the headline rate of UK inflation was unchanged last month, there were some significant price swings among the items in the “basket” that tracks the cost of living.

The biggest movement was in the cost of air travel, with average prices jumping by 11.9% in the year to August, having fallen by 10.4% in the 12 months to July, PA Media reports.

Butter and low-fat milk both saw similar swings from negative to positive inflation, with the price of butter up 0.9% in the year to August after falling 3.9% in the year to July, and low-fat milk rising 0.3% in August after dropping 0.4% in July, according to figures published by the Office for National Statistics (ONS).

Inflation accelerated for a range of everyday items, including the cost of cinema, theatre and concert tickets, which rose 9.2% in the year to August compared with a jump of 4.4% in the 12 months to July; the price of pizza and quiche, up 4.3% in August after a rise of 0.8% in July; chocolate, up 10.0% last month compared with 6.7% in July; women’s clothes (up 3.9% in August, up 2.6% in July); and bread (up 2.2% in August, up 1.1% in July).

Some items saw prices falling less slowly last month than in July, most notably second-hand cars, the average cost of which dropped by 6.6% in the year to August, having fallen by 8.4% in the 12 months to July.

The price of household furniture was down 1.0% in August, a smaller annual drop than 2.4% in July, and there were similar trends for the average cost of fish (down 3.0% in August after falling 4.2% in July), fruit and vegetable juices (down 0.4% in August, down 1.3% in July) and rice (down 2.3% in August, down 2.7% in July).

By contrast, the rate of inflation eased last month for tea (up 3.5% in the year to August compared with a jump of 8.4% in July), mineral water (up 2.8% in August, up 5.2% in July), ready meals (2.1% August, 4.2% in July), train travel (2.2% August, 3.7% July) and men’s clothes (1.2% August, 2.6% July).

Rents and house prices in London diverged this summer.

The capital saw the fastest rental increase of any area of England, with rents jumping by 9.6% year-on-year in August.

But… London was also the only area where house prices fell in the year to July:

Photograph: ONSEconomists: Next UK interest rate cut likely in NovemberToday’s inflation report should ‘“dispel the remaining hopes” held by some in the market that the Bank of England might move on interest rates ahead of its November meeting, say analysts at RBC Capital Markets.

Luke Bartholomew, deputy chief economist at abrdn, agrees, saying:

“It is hard to see this inflation report changing many minds at the Bank of England, with the data coming in pretty much exactly as expected.

Certainly the fact that headline inflation is a touch above target will come as no surprise to policymakers. Of greater focus will be the fact that various measures of underlying inflation are still quite elevated. That helps explains why the Bank of England is likely to be somewhat more cautious than the US Federal Reserve in its easing cycle over the next few months.

Indeed, the Bank of England now looks extremely likely to keep rates on hold tomorrow with the next cut probably coming in November.”

ING: Core services inflation is slowingLooking, back at the UK inflation report…. ING have calculated that ‘core services inflation’ dropped last month.

As we reported earlier, service sector inflation jumped from 5.2% to 5.6% in August – but ING’s maths suggests the underlying picture is better.

James Smith, ING’s developed markets economist, explains:

Beneath the surface of the latest UK CPI report, there are signs that the inflation story is slowly but surely moving in the right direction. That might sound weird, given that services inflation rose from 5.2% to 5.6% in August. Remember this is the guiding light for the Bank of England when it comes to rate cuts, and although today’s move was widely predicted, it looks like it is moving in the wrong direction.

Appearances can be deceiving. The fact is that the recent nudge higher in services inflation is largely thanks to base effects and higher inflation in price categories the BoE appears to care less about. We’ve calculated a measure of “core services” inflation, based on something the Bank put in its May Monetary Policy Report.

That excludes volatile categories like airfares, package holidays, and rents, arguably less relevant for monetary policy decisions. If our maths is correct, that’s now fallen to 4.9% from 5.5% just two months ago.

Photograph: INGThat would please the Bank – although probably not enough to prompt an interest rate cut tomorrow, though….

Post Office CEO Nick Read will leave the organisation on 15 March next year, the company says.

That means he’ll be able to testify to the next phase of the Horizon inquiry on behalf of the Post Office, and in a personal capacity.

In a statement, the Post Office says:

In November 2019, Nick led the settlement with the Group Litigation claimants, beginning the journey to address the wrongs of the past and to reset the relationship with Postmasters that continues today.

He championed the appointment of two serving Postmasters to the board and focused on increasing Postmaster remuneration, investing in training, expanding field teams and supporting Postmasters as part of a broader initiative to place today’s Postmasters at the heart of Post Office.

TGI Fridays owner to file for administration Photograph: Ian Hamilton/AlamyThe company behind the TGI Fridays chain is calling in administrators, a week after a attemped takeover of US-based franchisor TGI Fridays failed.

Hostmore has decided to appoint administrators from Teneo, and will also suspend trading in its shares, whose value has fallen to almost zero.

Hostmore has told the City that it is trying to find a buyer for its sites in the UK, and expects to conclude a sale by the end of September. However, it does not expect to recover enough money to cover its borrowings.

Its sites remain open.

IMF postpones Russia mission after EU backlashThe International Monetary Fund (IMF) has postponed plans to visit Moscow to review the Russian economy, following a backlash from European capitals.

The Tass news service has reported that the IMF has “indefinitely postponed” its first planned consultations with Russia.

According to Tass, Alexei Mozhin, Russia’s director at the IMF, blamed “technical unpreparedness”, saying:

“The Fund’s management notified the Russian side and the board of directors that the mission’s work would be postponed indefinitely.

“Technical unpreparedness of the mission to conduct consultations was mentioned as the reason for postponing the mission.”

Last week, the finance ministers of Lithuania, Latvia, Estonia, Finland, Sweden, Iceland, Denmark, Norway and Poland expressed their “strong dissatisfaction” with the IMF’s plans to visit Russia.

On the 8.4% jump in UK rents in the year to August, ONS head of housing market indices Aimee North says:

Rental prices continue to climb at a near-record rate, although the pace of the increase has slowed slightly.

London again saw the fastest growth in rents, with the slowest rise in the South West of England.

Photograph: ONSPost Office chief executive Nick Read to step downPost Office boss Nick Read is set to step down from the role next year, the company has said.

Read says it has been a “great privilege” to have worked as Post Office chief executive in an “extraordinarily challenging time for the business and for postmasters”, adding:

“It has been a great privilege to work with colleagues and postmasters during the past five years in what has been an extraordinarily challenging time for the business and for postmasters.

“There remains much to be done for this great UK institution but the journey to reset the relationship with postmasters is well under way and our work to support justice and redress for postmasters will continue.”

Today’s announcement comes after more than a year dominated by the fallout from the Horizon IT scandal, in which hundreds of post office operators were wrongfully inprisoned.

In July, Read said he was temporarily stepping back from the CEO role so he could give his “entire attention” to the next stage of the inquiry into Horizon.

Read became CEO of the Post Office in September 2019, succeeding Paula Vennells, who forfeited her CBE for “bringing the honours system into disrepute” over her handling of the Horizon IT crisis.

In February, the business and trade committee of MPs expressed a lack of confidence in Read’s leadership, accusing him of giving misleading evidence.

Read also denied a claim made by the former chair of the Post Office Henry Staunton that he had threatened to resign unless he was paid more. He was “exonerated of all misconduct allegations” following a report into his behaviour earlier this year.

Snap! Inflation across the euro area was 2.2% in August, matching the UK’s inflation rate.

Data provider Eurostat reports that inflation across the euro area fell last month, from 2.6% in July.

Inflation across the European Union was higher, at 2.4%.

Eurostat adds:

The lowest annual rates were registered in Lithuania (0.8%), Latvia (0.9%), Ireland, Slovenia and Finland (all 1.1%). The highest annual rates were recorded in Romania (5.3%), Belgium (4.3%) and Poland (4.0%). Compared with July 2024, annual inflation fell in twenty Member States, remained stable in one and rose in six.

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