UK inflation steady at 3.8% as food prices climb

UK inflation held steady last month, according to official figures, but food costs continued to climb, piling pressure on already stretched household budgets.

The Office for National Statistics (ONS) said on Wednesday that the Consumer Prices Index (CPI) rose by 3.8% in the 12 months to August 2025, unchanged from July. The figure was in line with economists’ expectations, and remains almost double the Bank of England’s 2% target.

The broader measure of inflation, CPIH, which includes owner occupiers’ housing costs, edged down slightly to 4.1% in August, compared with 4.2% in July.

On a monthly basis, both CPI and CPIH increased by 0.3%, with air fares providing the largest downward contribution to the annual rate, while higher prices for motor fuels, hotels and restaurants partly offset that fall.

Food inflation, however, accelerated for the fifth consecutive month, with the ONS highlighting increases in the cost of vegetables, cheese and fish.

Core inflation, which strips out volatile items such as energy, food, alcohol and tobacco, eased slightly. Core CPI fell to 3.6%, from 3.8% in July, while Core CPIH dropped to 4.0%, from 4.2% previously.

Rob Morgan, Chief Investment Analyst at Charles Stanley, said the latest figures highlight the UK’s “unique inflationary problem” compared with other developed economies:

“UK inflation remains stubbornly high, with August’s Consumer Prices Index (CPI) holding steady at 3.8%, in line with expectations. While price rises are expected to ease in 2026, households continue to feel the squeeze, caught between elevated living costs and a cooling jobs market. With food prices up 5.1% year on year and housing costs up 7.4%, the price of essentials has been escalating rapidly, making it very hard for people to escape the unwelcome resurgence.

For the Bank of England, sticky inflation presents a policy dilemma. Some MPC members argue that weakening demand and softer price pressures justify another rate cut before year-end. However, the persistence of elevated inflation complicates that narrative, and with services inflation still strong, rate cuts may be delayed until next year.”

The ONS said that while goods inflation ticked up marginally – from 2.7% to 2.8% – the services sector saw price growth slow, with services inflation falling to 4.7% on the CPI measure and 4.9% on the CPIH measure.